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Rajesh Abraham

Draft prospectus lying with SEBI for 2-3 months

Mumbai , June 13

With the drastic fall in stock market, the delay in getting final clearance for IPOs from the SEBI has come as a blessing in disguise for upcoming public issues.

Usually, the SEBI gives clearance for IPOs in about one-and-a-half months after companies file the draft prospectus with the regulator.

However, several IPOs including those of MCX, Parsvnath Developers and Gammon Infrastructure are yet to get the final clearances from the regulator, though their draft prospectus have been lying with the SEBI for 2-3 months.

"With the fall in stock market, the delay in getting SEBI clearance has come as a blessing in disguise," said a top investment banker. "It seems that the SEBI is going cautious on IPO clearances after the fall in prices of recent issues."

Companies are mandated to complete their IPOs within 90 days of getting the final SEBI clearance or 180 days after filing the audited financial results, whichever is earlier.

If they fail to hit the market before this time schedule, then they will have to go through the entire process all over again - which includes filing the prospectus, getting clearances from the NSE and the BSE, and relying to SEBI observations, among other issues.

The benchmark stock indices have fallen by about 30 per cent in less than a month, while several recent issues including the high-profile Reliance Petroleum, Sun TV and Punj Lloyd are trading below or near their issue prices.

"The mood is definitely down. We expect the market to improve only by August by latest. But we are prepared to wait even till November," said another investment banker.

Further, the sharp fall in stock prices, which bruised IPO investors very badly, would also force promoters to set a price band that are at very "realistic" levels, he said, adding that Deccan Aviation fell by 41.50 per cent from its issue price within two days of listing.

Investment bankers are also not ruling postponement in some of the big issues, including DLF and Parsvnath Developers.

When contacted, officials at DLF said that the company would stick to the original plan.

This means that the issue may hit the market by June-end or early next month and the pricing will be at Rs 700 a share.

As per the original plan, DLF would be raising Rs 10,500-13,500 crore by diluting about 13.9 per cent stake, making the issue the biggest IPO to hit the Indian market.

Investment banking sources also said that there has to be some "realignment" in the issue price to make it more attractive for investors in the wake of changed scenario.

Uncertainty regarding regulations on FDI in real estate is considered a main factor in delaying regulatory approval for both Parsvnath Developers, which filed its draft prospectus on March 21, and DLF, said bankers.

Mr Kumar Nair, Managing Director of Transwarranty Finance Ltd, said the company is expected to launch its IPO by August. It has already filed the draft prospectus. "We are confident that the markets will rebound and investor confidence will be restored by that time," he added.

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