Is IPO market on a road to recovery?

He said there are expectations that some filing may take place at the end of September to take care old accounts but there’s hardly any rush as even the due diligence requirement of Sebi has gone up dramatically.

"There is a greater emphasis on better diligence by the merchant bankers and that is all taking a lot of time as against the past where you could put together an offer document in a month or so and put it with Sebi," Haldea added.

Below is the transcript of Prithvi Haldea’s interview to CNBC-TV18’s Ekta Batra and Latha VenkateshLatha: What does it look like, the first two that we have just concluded look good as well we have got some fairly good names at least brands coming in? You think we are in the healthy phase of the Initial public offering (IPO) recovery?A: If you look at the last couple of years we have seen four IPOs come in in this period. We had Just Dial which got a fantastic response, then we had Wonderla Holidays which also got a very good response and recently we got Snowman and Sharda Cropchem. It shows that the market is ready, the investors are ready in case the offering is from an established company and if the valuations are, at that point of time seem to be fair. These are the two important things. So we have seen therefore in all these four issues these two conditions being met where there is a track record, there is a brand and there is a valuation which is considered to be reasonable by the investors. In the case of the recent two issues we should also remember that the size of the issue was very small so time subscribed is really not a very good indicator because there were Rs 200 crore odd issues or Rs 150 crore. But what it shows is that the market or the investors are ready for good IPOs but there are no issuers right now. The problem is that despite the bull run for the last five-six months the filings with Securities and Exchange Board of India (SEBI) have hardly improved. There has been no filing for the last one and half months. It is expected that during September end there would be some filings which would take place to take care of the six month old accounts as of March. But there is no rush so the market is there but I don’t see a rush right now. There are two reasons for this, one is that the eligibility norms of Sebi which were revised a couple of years back have made it difficult for new companies, new projects, untested waters to enter the market. Number two, the due diligence requirement of Sebi has gone up dramatically, disclosures have become much stronger. There is a greater emphasis on better diligence by the merchant bankers and that is all taking a lot of time as against the past where you could put together an offer document in a month or so and put it with Sebi. Merchant bankers currently 100’s of offer documents are currently at various stages but they are taking a lot of time. So in case the market sentiment continues, the secondary market remains on a bull run, the economy sends out the right signals, we will have issues coming in sometime, filing to start may be end of September-October onwards and you may have some kind of mini rush in the last quarter of this year. So as I divide the IPO market in four phases, the first phase is strong companies, reasonable valuations. Second phase is strong companies, higher valuations because the markets have gone up and therefore they are more aggressive in pricing. Third phase is bad companies, when I say bad means not very established companies, bad companies with low valuations and fourth phase is bad companies with high valuations. We are current in the first phase only where we are looking at good strong companies with fair valuations and in case we add some PSU divestment IPOs which hopefully may happen or FPOs which may happen, there could be some activity on the IPO in the primary market front.