SEBI takes stricter approach in IPO clearance; returns draft papers of 6 Companies

After the Paytm IPO fiasco, capital markets regulator SEBI has turned cautious while giving clearance to initial share sales as it has returned preliminary papers of half a dozen companies, including Oravel Stays, which operates hospitality chain OYO, in over two months.

These companies have been asked to re-file their draft red herring prospectus (DRHP) with certain updates.

Apart from 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; home-grown mobile maker Lava International; B2B payments and services provider Paymate India; Fincare Small Finance Bank India and integrated services company BVG India, according to an analysis of data with Sebi .

The six companies had filed their preliminary initial public offering (IPO) papers with Sebi between September 2021 and May 2022 and their papers were returned during January-March (till March 10).

Together, these companies were hoping to raise at least Rs 12,500 crore.

Sebi has become stricter in its approach while giving its go-ahead to IPOs after investors lost their money in some of the high-profile initial shares in 2021 and according to data compiled by Primedatabase.com, the average time taken by the markets regulator in approving an IPO in 2022 was 115 days.

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 - Divgi Torqtransfer Systems and Global Surfaces - have floated their initial share sales to raise Rs 730 crore since the beginning of the year, while Udayshivkumar's Rs 66 crore-IPO is slated to open next week.

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.