Capital market regulator Securities and Exchange Board of India is concerned about the decline in capital-raising activities in the market. SEBI chief U.K. Sinha said Rs 60,000 crore worth of approvals and intentions to raise money have either been allowed to lapse or withdrawn.

“Between 2009 and October this year, 134 companies filed DRHPs (draft red herring prospectus) with SEBI to raise capital. But they either withdrew it or they allowed the SEBI observation to lapse,” he said at the CII Capital Market summit. He added that half the approvals and intentions lapsed during this year. Some of the companies that allowed their IPOs to lapse during 2012 include Reid & Taylor, Tata Autocomp, Micromax, Embassy Property, Joyalukkas, Lokmat Media and VRL Logistics. This year, companies have raised Rs 7,500 crore, of which 93 per cent has been since August. A major portion of this was raised through rights issues and not IPOs. “While the figure of Rs 7,500 crore may give us the impression that things are not too bad, the fact remains that capital-raising has come down substantially,” Sinha said.

In response to this, he said SEBI is looking to find out why this is so. “When you have a tremor you start looking at the superstructure. SEBI is trying to do that and find the deep-rooted causes. Why are people not interested in the market? I am trying to discover the underlying thought,” he said, hinting at the inappropriate pricing of issues.

If 95-100 per cent of the issues are trading below the issue price, something is wrong with the pricing, added Sinha.

(This article was published on December 12, 2012)
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