after paytm IPO After the fiasco, Sebi has turned cautious while approving initial share sales as it has returned preliminary papers of half a dozen companies, including hospitality chain OYO operated Oravel Stays, in more than two months. These companies have been asked to re-file their Draft Red Herring Prospectus (DRHP) with certain updates.
Besides OYO, the firms whose draft papers have been returned by the regulator are – Go Digit General Insurance Ltd, a firm backed by Canada-based Fairfax Group; domestic mobile maker Lava International; Paymate India, a B2B payments and services provider; Fincare Small Finance Bank India and integrated services company BVG India, according to an analysis of SEBI data.
Six companies had filed initial public offer (IPO) papers with SEBI between September 2021 and May 2022 and their papers were returned during January-March (by March 10).
Together these companies were hoping to raise at least Rs 12,500 crore.
SEBI has become stricter in its approach to go ahead with IPOs after investors lost money in some high-profile initial shares in 2021 and the average time taken by the market regulator to clear IPOs in 2022, according to data compiled by Primedatabase.com. It took 115 days to give approval.
“Following the IPO fiasco of listing new age digital companies like Paytm, Zomato and Nykaa, in which investors suffered huge losses, SEBI has tightened approval norms for IPOs. This is welcome and in the interest of investors,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
However, ultimately investors will have to use their heads while applying for IPOs and avoid high priced issues, he said.
One97 Communications, the parent unit of digital payments firm Paytm, made a disappointing debut in November 2021 on the exchanges. The company’s Rs 18,300-crore IPO was the biggest on Dalal Street after Coal India. The stock of the digital payments firm was still trading 72 per cent lower than its issue price.
Prakhar Pandey, founder and CEO of Moolah, believes that SEBI’s recent move sends a strong message to merchant bankers that they must fully comply with the set of information required for submission of the draft prospectus and all important information required disclose, rather than the exhaustive back and forth between bankers, firms involved with the IPO, and regulators.
Earlier, SEBI continued to give a grace period to most firms to file their complete set of compliance documents, which led to a higher gestation period of four months compared to last year. He said that this could lead to a big mess in terms of the IPO price band.
So far this year, only nine companies have approached SEBI with their draft IPO documents amid extremely volatile market conditions and volatile investor sentiments.
Moreover, only two companies – Divgi Torquetransfer Systems and Global Surfaces – have issued their initial share sales to raise Rs 730 crore since the beginning of the year, while Udayashivkumar’s Rs 66 crore IPO is set to open next week.
This came after 38 companies collectively raised close to Rs 59,000 crore through IPOs in 2022, much lower than the Rs 1.2 lakh crore raised by 63 companies in 2021, which was the IPO year in a decade.
The total collection in 2022 would have been much lower had it not been for the Rs 20,557 crore-LIC public offer, which was 35 per cent of the total amount raised during the year.
Investors remained nervous till 2022 due to fears of recession amid rising inflation and rising interest rates.
Experts believe that some activity on the IPO front can be seen only in the second half of FY 2023-24.
“Rising interest rates, a global banking crisis, FPI outflows, slow economic growth, easing inflation, and some governance issues in large corporates with low earnings and high valuation multiples, are factors for the market correction.
“These challenges, once fully addressed, is when we may see private companies hitting the public markets, probably in the second half of FY24, and SEBI’s current IPO applications to derail these pessimistic market sentiments Want to wait for this period,” said Pandey.
Geojit’s Vijayakumar said given the volatility in the market right now, only well-priced companies that are attractively priced will get a good response from investors.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)