Constant loss of money will make retail investors refrain from IPOs: U K Sinha

If the investors feel that they are continuously losing their money in IPOs, they are not going to enter the market, UK Sinha said.

With 2015-16 has been a roller-coster ride for the primary market, with 10 out of total 18 initial public offerings (IPOs) are trading above their issue prices, this year has been the best in past four years for the investors. The recent measures taken by the Securities and Exchange Board of India (Sebi) to ease the IPO process can be considered as one of the reasons for the success of the primary market in the current fiscal. However, U K Sinha, Chairman, Sebi, emphasized on safety of retail investors, particularly in IPO market.

“If the investors feel that they are continuously losing their money in IPOs, they are not going to enter the market,” said Sinha at the AIBI Summit 2015, organized in Mumbai today by Association of Investment Bankers of India (AIBI).

Expressing his views on the performance of IPOs in FY16 so far, Sinha added that prior to 2013, more than two-thirds of the new issues were trading below issue price. Obviously, it had impact on investors. But I am happy that IPOs that have come this year, 56 per cent are trading above the issue price. Total primary issues in FY15 were worth Rs. 9,700 crore, but this fiscal it is Rs 18,300 crore, out of which Rs 16,150 crore would come from sectors such as healthcare, education, hotel and restaurants, while there are no issues from banks, and power companies which have been traditionally active.

Speaking about the impact of easing the IPO regulations, the Sebi chief noted that we have reduced the time taken to process and clear DHRPs has now been reduced to half and the new IPO norms will be effective from January 1.

“Earlier it was complained that Sebi was taking more time to clear IPOs, but it was aimed at the safety of retail investors. In some cases, we had been persuading the corporates to come out with safety grades with investors’ safety in mind,” Sinha added.

Sebi along with the RBI and the Indian Bankers’ Association has taken initiative to educate all the bankers about ASBA so that retail investors’ money is not blocked indefinitely by participating in IPOs, the Sebi chief informed.

Throwing light on broader economic picture, Sinha noted that there has been increasing realization from the international as well as domestic agencies that the economy is going a right path. The forecast by the world Bank and the IMF made one year earlier about Indian economy has now seen an upsurge on 100 basis points. In the last quarter, Indian economy has seen more growth as compared to the corresponding period last year.

“Also, inflation is under control, the current account deficit (CAD) to the GDP ratio is currently 2/3 and the recent IIP data is also encouraging,” Sinha added.

However, on a flip side, our exports have been falling since last 11 months and during this financial year, our exports have fallen by 17.4% to US$ 154 billion. In addition, for July - September 2015, the growth of corporate sector has been muted at around 1% as compared to the same period last year. The bank loan growth between September 2014 and September 2015 was 8.4%, which has now been 8.1% for October 2014 to October 2015.

“In FY 16 till 8 November the FPI equity flow is -US$ 3 billion, in the debt segment they have been more positive, so we have come to nearly US$ 1.2 billion plus. But in the last fiscal it was US$ 12.3 billion in equity and US$ 18.6 billion in debt segment, totaling to US$ 30.9 billion,” Sinha pointed out.