The Securities and Exchange Board of India (SEBI) has returned the draft papers of six companies seeking to launch their initial public offerings (IPOs), indicating a stricter approach in the clearance process. The move comes after SEBI Chairman Ajay Tyagi had earlier warned about the need for transparency and adherence to regulatory norms in the IPO market.
The regulator returned the draft papers of the six companies due to incomplete or inadequate disclosures in their offer documents. The companies include an insurance services provider Go Digit, home-grown mobile maker Lava International; B2B payments and services provider Paymate India; Fincare Small Finance Bank India and integrated services company BVG India, according to SEBI. These companies had planned to raise a sum of at least Rs 12,500 crore.
SEBI strict approach:
However, the recent disappointing performance of some new-age digital companies during their IPOs, such as Paytm, Zomato, and Nykaa, caused significant losses for investors. In response, the SEBI has introduced stricter norms for IPOs to protect the interests of investors. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, has expressed support for these stricter norms, stating that they will be beneficial for investors.
This is not the first time that SEBI has taken a tough stance in the IPO clearance process. Last year, the regulator had returned draft papers of several companies, including those of SBI Cards and Payment Services, due to inadequate disclosures in their offer documents.
The regulator has been stringent towards clearance of IPOs after a string of cases of companies misleading investors and regulators, leading to losses for investors. In recent years, there have been several instances of companies providing incorrect or incomplete information in their offer documents or using manipulative techniques to inflate their valuations.
SEBI has been taking various steps to improve the transparency and integrity of the IPO market. The regulator has introduced several changes to the IPO clearance process, including a requirement for companies to disclose their promoter group entities and their shareholding patterns, and a mandatory lock-in period for certain categories of investors.
The regulator has been stringent towards clearance of IPOs after a string of cases of companies misleading investors and regulators, leading to losses for investors. In recent years, there have been several instances of companies providing incorrect or incomplete information in their offer documents or using manipulative techniques to inflate their valuations.
SEBI has also tightened the rules for merchant bankers and other intermediaries involved in the IPO process. The regulator has imposed stricter norms for due diligence and mandated greater accountability for merchant bankers in case of any lapses or violations.
SEBI’s tough stance in the IPO clearance process is expected to boost investor confidence in the market. It will help in weeding out fraudulent or unscrupulous companies that seek to take advantage of the buoyancy in the IPO market to raise funds. It will also ensure that only genuine and well-managed companies with a proven track record are able to access the capital markets.
However, the tougher approach could also lead to delays in the IPO clearance process and discourage some companies from going public. It may also increase the costs and time involved in preparing the offer documents, as companies will have to ensure that they comply with all regulatory norms and provide complete and accurate information in their documents.
SEBI’s strictness towards IPO clearance is a positive step towards improving the transparency and integrity of the capital markets. It is essential to protect the interests of investors and maintain the credibility of the IPO market. While the tougher approach may result in some short-term delays and costs, it will lead to a healthier and more sustainable market in the long run.
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