Sebi, i-bankers discuss revival of IPO market

Despite a 35 per cent rally in the equity market, India Inc has managed to raise only less than Rs 900 crore, lowest in more than a decade, through four initial public offerings (IPOs) in 2014. This was the main topic of discussion at the Primary Market Advisory Committee (PMAC), a Sebi (Securities and Exchange Board of India) expert panel, meeting held on December 1, sources said.

At the meeting, the capital market regulator sought feedback from industry players on why there are few companies coming forward with IPO plans, despite encouraging investor appetite.

According to the Sebi data, less than 20 companies—most of them small—have currently filed their offer documents with the regulator for IPOs.

According to sources, the investment banking community told Sebi they were taking more time to vet offer documents in the wake of recent orders over inadequate disclosures in certain IPOs. The regulator last week had penalised six investment bankers handling the CARE IPO for disclosure lapses. Also, in October, Sebi had also barred DLF from accessing the capital markets for three years over violation of disclosure norms during its 2007 IPO.

Whether the move to allow Indian companies to list overseas will lead to an export of domestic IPO market was another topic of discussion at the meeting.

Industry players asked Sebi to ensure that companies don’t take advantage of any regulatory arbitrage under the new norms.

Bankers told Sebi a lot of Indian companies might consider listing on overseas bourses such as London’s Alternative Investment Market (AIM), where the regulatory and disclosure norms are less stringent.

The government has recently amended the depository receipt regulations to enable overseas listing of Indian companies without the prerequisite of domestic listing. Although no company has yet tapped this route, experts say issuers might be attracted to some overseas platforms, where disclosures aren’t very strict.

“Platforms such as AIM, which do not have particular minimum admission criteria in terms of company size, prior trading record, number of shares required to be in public hands or minimum market capitalisation, could attract lot of issuers,” said an investment banker.

According to a source, Sebi is considering reducing the regulatory arbitrage that small entities could enjoy on overseas platform.