The Securities and Exchange Board (SEBI) has returned the draft papers of six companies that are seeking initial public offerings (IPOs), marking a shift towards a more stringent approach in clearing IPOs.
The six companies that had their draft papers returned are Oravel Stays, Go Digit General Insurance, Lava International, Paymate India, Fincare Small Finance Bank, and BVG India. These companies had plans to collectively raise a total of Rs 12,500 crore from the primary market.
They had filed their respective draft red herring prospectuses with SEBI between September 2021 and May 2022, and the same were returned during January-March of this year, according to a PTI report.
SEBI has become stricter in its approach to giving clearances to IPOs after the fiasco of some high-profile companies such as Paytm, Zomato, and Nykka that issued IPOs during the 2021 boom—issues in which investors lost heavily. According to data compiled by Primedatabase.com, the average time taken by Sebi in approving an IPO in 2022 was 115 days.
The move by SEBI to return the draft papers sends 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.
Experts believe that some activity on the IPO front could only be seen in the second half of the financial year 2023-24. Investors remained jittery throughout 2022 on recessionary fears and rising interest rates amid soaring inflation. Considering the turbulence in the market now, only attractively priced good companies are likely to get a good response from investors.
So far this year, only nine companies have approached SEBI with their draft IPO papers amid extremely volatile market conditions and jittery investors’ sentiments. Moreover, only two companies have floated their initial share sales to raise Rs 730 crore since the beginning of the year. 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% of the total amount raised during the year. As many as 38 companies floated IPOs during 2022, raising Rs 59,000 crore, a figure much lower than Rs 1.2 lakh raised by 63 companies in 2021.
