'Time-bound listing' plan for PSUs fails to take off

A state-owned unit was to list within 165 days after its IPO got approval by govt

The 'time-bound listing' for public sector undertakings (PSUs), announced in this year's Union Budget, isn't being met.

A state-owned unit was to list within 165 days after its Initial Public Offer of equity (IPO) got approval by its parent ministry or department and by the department of investment and public asset management (Dipam).

The idea was to help the Centre with its ambitious disinvestment target of over Rs 70,000 crore for the current financial year. However, PSUs have repeatedly missed the schedule set under the guidelines, which had deadlines for each task in the IPO process. Examples are General Insurance Corporation (GIC Re), New India Assurance, IRCTC and Ircon.

For instance, the Centre had allowed 90 days for the company to file an offer document with market regulator Sebi, from the day of board authorisation for the IPO. Within this period, 45 days were allotted for investment bankers to do the due-diligence and for filing of offer documents. Notably, the Centre had budgeted only 30 days for Sebi's nod to the IPO; typically, this takes at least two months.

The boards of GIC Re and New India Assurance approved the resolution to list in July 2016. They're yet to complete the listing process. Both GIC and New India Assurance filed their draft prospectus with Sebi at the beginning of this August. They've yet to get a go-ahead from Sebi. Similarly, Indian Railways-backed IRCTC's and Ircon's IPO proposal was approved in April and bankers were appointed four months earlier. However, these two are yet to file the draft prospectus with Sebi.

Cochin Shipyard is the latest PSU to come out with an IPO but it did not follow the guidelines. It had filed its prospectus with Sebi on March 31 this eyar. However, it took nearly 145 days for the company (from the date of filing the draft prospectus) to list on the exchanges.

Investment bankers handling the issues say the timelines set by the Centre ignored various practical issues. Not did it take into consideration the need for approval from multiple regulatory authorities in some cases, as with GIC Re or Cochin Shipyard.

A senior Dipam official said the timelines were "indicative" and might be falling short but the aim was to hasten the entire listing process. "Until last year, it took two-three years for a PSU to complete the listing process. Now, things are moving much more quickly. With the listing of Hudco and Cochin Shipyard, you can be sure about the seriousness of the government about these listings," said the official.

According to sources, the ministry of environment took close to three months to give a go-ahead for the Cochin Shipyard IPO. Similarly, GIC Re and New India Assurance required a nod from the insurance regulator, apart from Sebi.

"The IPO process is complicated and there could be unexpected hitches. Sometimes, the approvals take longer than expected. Further, bankers could also face hurdles during due-diligence. Most important, even if every procedure is completed on time, the market conditions might not be conducive for launch of the issue," said a banker.

So far this financial year, the Centre has raised Rs 19,078 through various divestments, show Dipam data. At least half a dozen IPOs of PSUs are expected to hit the market before March 2018.

Highlights of the IPO story

• According to time-bound listing guidelines put up by Dipam, a PSU should ideally list within 165 days from the time when IPO process started
• Within 165 days, 15 days are given for the board of the PSU to approve the IPO, 90 days for appointment of bankers, due diligence and filing offer document
• The document expects a nod from Sebi within 30 days and the company is expected to launch the IPO within 30 days from the approval date
• Boards of GIC Re and New India Assurance approved the IPO proposal more than a year ago, the IPO is yet to hit the market
• Similarly, IRCTC and Ircon commenced the IPO process more than four months ago, but are yet to file the offer documents