The Securities and Exchange Board of India (SEBI), under pressure to tighten scrutiny, is taking as long as a year to approve initial public offerings, prompting criticism from firms already grappling with unpredictable demand and a lack of alternative funding sources. India's stock market has soared, touching record highs last month. It was Asia's second-best performer last year, thanks largely to more than $16 billion of foreign investment. But the boom has failed to translate into many IPOs, a vital source of capital especially for small companies which make up the bulk of the economy yet often struggle to access keenly priced bank loans. Investor demand has been lukewarm, and India has seen lacklustre debuts in 2015. Private equity firms, key drivers of the market, have also struggled to exit through listings that would in many cases crystallise losses.
But some bankers and companies say delays in the review of listing documents by the SEBI are complicating the listing process, jeopardising billions of dollars of extra liquidity for Indian shares.
"Getting an approval takes a lot of time, and after that, unless you have four or five merchant bankers willing to underwrite the whole issue, it becomes very difficult to raise money," said Nevil Savjani, vice president at boutique merchant banker Corporate Strategic Allianz Limited. "SEBI's guideline is that they approve it within 30 days, after an in-principle nod from the stock exchanges. But generally, if you look at any of the IPOs it takes it at least one year."
The time regulators take to approve listing prospectuses can vary depending on everything from the quality of the document to the amount of IPOs in the pipeline. But Hong Kong, for example, typically takes a month or two, and no longer than six months. It also wants to prevent a repeat of cases like property developer DLF, penalised by SEBI last year for disclosure problems around its record 2007 listing. The penalty was overturned on appeal. Inox Wind Ltd (INWN.NS), an alternative energy firm which began trading this month, had to wait for a year before its listing plans were approved. Its bankers, awaiting a favourable moment, took another eight months to get the shares to market.
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