The Securities and Exchange Board of India (Sebi) is working on reducing the time gap between the close of initial public offers (IPO) and their listing, but the timeline for getting approvals for these share sales seems never-ending for some firms. At least 15 companies planning public offerings have waited for over a year to get regulatory approvals, according to processing data released by the capital market regulator on February 24.
Companies facing more than a year's delay include Shirdi Industries, Jain Infraprojects and Jawed Habib Hair and Beauty. The Sebi website lists the issue status in most of these issues as 'under process'. In some others, it is shown as ‘clarifications sought ‘.
Shirdi Industries, which filed the IPO in April 2010, has waited for over 600 days. At present, there are more than 70 companies which have filed their draft offer documents with the market regulator.
It's not just the private companies that have been facing delays. Even government-owned Bharat Heavy Electricals Ltd (BHEL), which had filed the offer document for a follow-on public offering (FPO) in September 2011, is yet to get a go-ahead.
Uncertainty over getting a final nod has been hurting merchant bankers as issue planning becomes a challenge for them. Besides, a long delay means most of the information provided in the offer documents, including results, becomes outdated.
Once a company files draft red herring prospectus, the regulator is supposed to come up with remarks and observations within 30 days. Merchant bankers say Sebi seeks clarification or additional information just ahead of the stipulated time, which results in delays.
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Merchant bankers have already met Sebi chairman U K Sinha to discuss this issue. "The chairman assured us that it will put in place a timeline, but would also ask for better disclosures from merchant bankers and companies,” said an investment banker, who claimed to have met the Sebi chairman on this issue.
In a recent seminar, Sinha had said the issuer companies should also share the blame for delays as in some cases, these companies deliberately delay sharing information sought by the regulator because market conditions are not favourable.
Sebi approvals are valid for one year. If the company fails to sell shares within this period, it has to approach the regulator again.
According to primary market observers, the average time lag between filing offer documents and receiving final approval has increased to about six months, from three months, earlier.
In the past, Sebi had taken about 400 days to give a final approval to RDB Rasayans and Rushil Decor. Maybe, the regulator's apprehensions in giving these companies a go-ahead to launch public offerings were valid, as both ended among the seven companies which were recently banned by Sebi for allegedly violating IPO norms.
Among other prominent companies, which took about six months to get their IPO documents cleared, include Future Ventures, Raheja Universal and Greatship India. While the former launched its offering, the latter two had to defer their IPO plans due to weak market conditions.
National Buildings Constru-ction Corporation Ltd (NBCC), which filed its issue prospectus earlier this month, is also expecting an approval. The NBCC IPO, which is part of this year's disinvestment programme, has already started conducting roadshows.