Regulator puts IPO clearance on fast track

Several issues this year have obtained approval in less than 2 months

In an attempt to boost markets, the Securities and Exchange Board of India (Sebi) has introduced measures that have helped reduce the time taken for clearing initial public offerings (IPOs).

For example, Sebi cleared the Rs 1,240-crore IPO of Larsen & Toubro's (L&T's) technology arm L&T Infotech in a record 38 days. Other marquee IPOs such as ICICI Prudential Life Insurance, L&T Technology and Ujjivan Financial Services were also cleared in less than two months by the market regulator.

Investment bankers say the time taken to clear offer documents has decreased considerably, aiding the strong momentum in the IPO market, which has seen a mop up of around Rs 20,000 crore so far this year.

"The IPO clearance process has really improved and a lot of issues have been getting quick approvals," said Kaku Nakhate, president & country head, Bank of America, which has handled issues such as ICICI Prudential Life and L&T Technology.

The number of days between an issuer filing an offer document and obtaining approval from Sebi has reduced to about 70 days this year from around 100 days last year, data provided by Prime Database show.

Companies have to file offer documents with Sebi before they come out with a public issue. After this, the regulator vets the documents and takes a decision on allowing companies to hit the market.

"Sebi has said if there is no ambiguity in the offer document, we won't hold back the IPO clearing process," said Atul Mehra, head, investment banking, JM Financial. Business Standard spoke to investment bankers on the sidelines of recent IPO conferences.

Besides beefing up its corporate finance department, which is responsible for clearing of IPOs, Sebi has also increased communication with issuers and bankers. This has helped bring down the time required for clearance say industry players.

"Sebi processes offer documents promptly. In case the draft has remained unattended or there is an inordinate delay, the lead manager or issuer should not hesitate in writing to chief general manager or the executive director," sebi says on its website.

Most bankers say quick turnaround is helping them plan and time the market better. Fund raising through IPOs this year has already been 50 per cent higher than the whole of last year. Also, the IPO pipeline appears to be strong with several Rs 1,000 crore-plus issues such as those of the BSE, PNB Housing Finance and Endurance Technologies waiting to the hit the market.

To be sure, not all issues filed with Sebi have obtained approvals in two months. There have been at least half a dozen that have had to wait over 100 days to be cleared.

Experts say the key to obtain quick approval is to file an offer document with all requisite information and to be available to provide any additional information sought by Sebi.