After the Paytm’s IPO fiasco, Sebi has turned cautious whereas giving clearance to the preliminary share gross sales because it has returned the preliminary papers of half a dozen corporations, together with Oravel Stays, which operates hospitality chain OYO, in over two months. These corporations have been requested to re-file their draft crimson herring prospectus (DRHP) with sure updates.
Apart from OYO, the corporations whose draft papers have been returned by the regulator are — Go Digit General Insurance Ltd, a agency backed by Canada-based Fairfax Group; home-grown cell maker Lava International; B2B funds and companies supplier Paymate India; Fincare Small Finance Bank India and built-in companies firm BVG India, in accordance with an evaluation of information with Sebi.
The six corporations had filed their preliminary preliminary public providing (IPO) papers with Sebi between September 2021 and May 2022 and their papers had been returned throughout January-March (until March 10).
Together, these corporations had been hoping to boost at the least Rs 12,500 crore.
Sebi has develop into stricter in its method whereas giving its go-ahead to IPOs after buyers misplaced their cash in some of the high-profile preliminary shares in 2021 and in accordance with information compiled by Primedatabase.com, the typical time taken by the markets regulator in approving an IPO in 2022 was 115 days.
“After the IPO fiasco following the itemizing of new age digital corporations like Paytm, Zomato and Nykaa in which buyers misplaced closely, Sebi has tightened the approval norms for IPOs. This is welcome and is in the curiosity of buyers,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
However, ultimately investors have to apply their minds while applying for IPOs and avoid high-priced issues, he added.
One97 Communications, the parent entity of digital payments firm Paytm, made a disappointing debut on the bourses in November 2021. The company’s Rs 18,300-crore IPO was the biggest on Dalal Street after Coal India. The digital payment firm stock was still trading 72 per cent lower from its issue price.
Prakhar Pandey, Founder and CEO of Moolaah, believes that the recent move by Sebi gives a strong message to merchant bankers to fully comply with the set of information required to furnish the draft prospectus, and disclose all material information required well in advance, rather than a complete back and forth between the bankers, IPO-bound firms and regulators.
Earlier, Sebi continued to give grace periods to most firms, to file their full set of compliant documents, which used to lead to a high gestation period, as high as four months as of last year. This could lead to a big distortion in terms of the IPO price band, he added.
So far this year, only nine companies have approached Sebi with their draft IPO papers amid extremely volatile market conditions and jittery investors’ sentiments.
This came after 38 companies collectively garnered close to Rs 59,000 crore through IPOs in 2022, which was much lower than Rs 1.2 lakh crore mopped up by 63 companies in 2021, which was the IPO year in a decade.
The overall collection in 2022 would have been much lower had it not been for the Rs 20,557 crore-LIC public offer, which constituted as much as 35 per cent of the total amount raised during the year.
Investors remained jittery throughout 2022 on recessionary fears and rising interest rates amid soaring inflation.
Experts believe that some activity on the IPO front could only be seen in the second half of financial year 2023-24.
“A host of factors like rising interest rates, a global banking crisis, FPI outflows, slow economic growth, taming inflation, and certain governance issues across large corporations with low earnings and high valuation multiples, are driving factors for the correction in the market.
“These challenges, once fully tackled, is when we might see private companies hitting public markets, probably in the second half of FY24, and existing IPO applications at Sebi might want to wait out this period of lull, to derail these pessimistic market sentiments,” Pandey mentioned.
Considering the turbulence in the market now, solely attractively priced good corporations will get response from buyers, Geojit’s Vijayakumar mentioned.
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(This story has not been edited by News18 employees and is printed from a syndicated information company feed)
