Indraprastha Gas IPO in trouble

Indraprastha Gas Ltd's plans for an initial public offer have run into trouble. The bone of contention is the Securities and Exchange Board of India's (Sebi) new norms on book-built issues, which say all IPO-related processes such as allotment and listing should be completed within six days after the issue is closed.

Indraprastha Gas will be the first to be affected by the Sebi guidelines, which were issued in the middle of August. This could well become a test case for future book-built issues as well as simultaneous offerings in India and abroad.

The merchant bankers to the issue""J M Morgan Stanley, Enam Financial Consultants and Kotak Mahindra""are in the process of holding discussions with the market regulator to sort the problem.

They want Sebi to reconsider its decision on the T+6 deadline for the time being. Sebi sources indicated that the issue was being debated and no decision had been taken as yet.

The main glitch in listing fresh issues in such a short term is connectivity, especially with banks. Banks take a minimum of three days to clear cheques within a city, while outstation cheques take more time.

Further, the systems at the Bombay Stock Exchange and the National Stock Exchange are not compatible, which means reconciliation takes a longer time. Moreover, there is no connectivity among depositories, banks and registrars.

Merchant bankers said it took a minimum of 15 days for the entire process and, therefore, Sebi should set a more realistic time limit.

In the proposed simultaneous offering of shares of National Aluminium Company, international investors had agreed to a longer deadline for listing of shares, with the US Securities Exchange Commission (SEC) settling for some delays.

Indraprastha Gas is offering 40 million shares, held by IL&FS Trust, Infrastructure Development Finance Company and Unit Trust of India, to the public.

The floor price is yet to be decided, but the draft prospectus has been filed with Sebi. The timing of the issue depends on Sebi's decision on the T+6 deadline.