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Sebi, investment bankers turn cautious as IPO market faces uncertainty

Mumbai, March 20, 2023 

The initial public offering (IPO) market is facing uncertainties with market regulator Sebi returning several IPO documents and investment bankers and companies treading cautiously as the stock market has fallen 8.79 per cent since December 2022.

The regulator has returned the offer documents of Oravel Stays, the parent company of travel-tech firm OYO and Go Digit General Insurance, a firm backed by Canada-based Fairfax Group owned by Prem Vatsa. It also returned offer documents of Pune-based integrated facilities management company BVG India, payment services provider Paymate India and Fincare Small Finance Bank, which had refiled its draft prospectus with the regulator in August last year. Several others which were planning to file the IPO papers have decided to hold back their plans, said an investment banker.

Though the regulator has not made public any reason for returning the IPO documents, bankers said it could be due to the poor performance of many new age companies on the stock markets after listing in 2021 and 2022.

With the stock markets highly volatile in the wake of the global turmoil, investment bankers are also pessimistic about a smooth listing of shares. “While the reasons for returning the offer documents may be company-specific, Sebi wants the documents to be fully compliant at the time of filing. In general, any material update or change has to be incorporated in the draft red herring prospectus and refiled,” said a banker.

What has upset the plans of the IPO aspirants is the 5,493-point fall in the Sensex (from 63,583.07) since December 1, 2022 to 57,989.90 by Friday (March 17). With the global banking turmoil and inflation worries still playing out, investment bankers are not expecting a smooth sailing for IPOs.

Even the promoters and companies have turned cautious as many high-profile IPOs of 2021 like Paytm, FSN E-commerce (Nykaa), Nazara Technologies, PB Fintech, CarTrade Tech, Easy Trip Planners, Aditya Birla Sun Life AMC and Fino Payments disappointed investors with their share prices falling steeply below their IPO prices. Share price of LIC, which came out with an IPO at Rs 949 per share, has fallen by 39 per cent to Rs 579.90 on the exchanges.

Within a year of listing, new age firms like Zomato, Paytm, Delhivery, Policybazaar and Nykaa have seen their valuations crash by over 60 per cent.

While the Sebi was earlier lenient in clearing the IPOs, it is returning the documents to bankers instead of letting them remain in the processing stage for an indefinite period of time. Companies themselves earlier chose to withdraw the offer document if a significant time elapsed after filing.

Several new-age companies which filed the offer documents are not meeting Sebi’s requirements on disclosures and valuations. Given the flurry of filings in the recent past, it is possible that the quality of work put in while compiling the offer documents has slipped a bit at the bankers’ end.

In 2022, issuances were lower at Rs 55,472 crore as compared with Rs 1.22 lakh crore issued in 2021 as companies and promoters became cautious in the wake of volatility in the stock market. The IPO mobilisation is expected to fall further in 2023.

[The Indian Express]

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