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SEBI Takes Stricter Approach in IPO Clearance; Returns Draft Paper of 6 Cos

These businesses have been asked to submit updated versions of their Draft Red Herring Prospectus (DRHP).

According to an analysis of SEBI data, Go Digit General Insurance Ltd., a company backed by the Canadian Fairfax Group, Lava International, Paymate India, a B2B payments and services provider, Fincare Small Finance Bank India, and BVG India, an integrated services company, are among the companies whose draft papers have been returned by the regulator in addition to OYO.

Between September 2021 and May 2022, six firms submitted initial public offering (IPO) papers to SEBI, and their papers were returned in the months of January to March (by March 10).

These businesses were anticipated to raise a total of at least 12,500 crores.

According to data gathered by Primedatabase.com, SEBI has been harder in its approach to proceeding with IPOs as a result of investors losing money in several high-profile first shares in 2021 and the typical time it took the market regulator to clear IPOs in 2022. To grant permission, 115 days were needed.

“SEBI has tightened the approval norms for IPOs in response to the IPO catastrophe that followed the listing of new-age digital companies like Paytm, Zomato, and Nykaa, in which investors suffered significant losses. According to VK Vijayakumar, chief investment strategist at Geojit Financial Services, this is favorable and in investors’ best interests.

However, he warned, investors will eventually need to exercise caution when filing for IPOs and stay away from expensive securities.

Paytm’s parent company One97 Communications debuted on the exchanges in November 2021 with a lackluster performance. The largest IPO on Dalal Street following Coal India was 18,300 crore. The stock price of the company that handles digital payments was still 72% below its initial public offering.

Instead of the lengthy back and forth between bankers, companies involved with the IPO, and regulators, Prakhar Pandey, founder and CEO of Moolah, believes that SEBI’s recent action sends a clear 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 disclosure.

Prior to this, SEBI continued to grant most firms a grace time for filing their full set of compliance paperwork, which increased the gestation period to four months from previous year. According to him, the IPO price band could get very complicated as a result.

Only nine businesses have submitted their draft IPO documents to SEBI so far this year, despite the extraordinarily unpredictable market and investor attitude.

In order to boost sales, only two businesses—Divgi Torqtransfer Systems and Global Surfaces—have issued their initial shares. 730 crores at the start of the year, while Udayashivkumar’s 66 crore initial public offering (IPO) will start trading next week.

This comes after 38 companies raised close to $59,000 billion through initial public offerings in 2022, a significant decrease from the $1.2 lakh raised by 63 companies in 2021, the busiest year for IPOs in ten years.

Had it not been for the 20,557 crore-LIC Public Offer, which accounted for 35% of the entire amount gathered throughout the year, the total collection in 2022 would have been significantly lower.

Investor jitters persisted until 2022 as a result of recession worries amidst rising prices and interest rates.

According to experts, the second half of FY 2023–24 will be the only time that there will be some action on the IPO front.

“The market correction is the result of a number of causes, including increasing interest rates, a global banking crisis, FPI withdrawals, poor economic development, low inflation, and some governance difficulties in huge firms with high valuation multiples and low earnings.

“If these issues are entirely resolved, we might see private companies enter the public markets, most likely in the second half of FY24, and current IPO applications at SEBI could help to temper these gloomy market expectations.

Pandey said, “Want to wait until this period.

According to Geojit’s Vijayakumar, only attractively priced, well-priced companies can attract investors given the current market volatility.

This story’s text was published exactly as it appeared in a wire service feed.

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