Market regulator SEBI on Tuesday said it has become challenging for the companies to raise money from the capital markets, and there is a significant weakness in the IPO segment in India and other Asian countries.
Tough market conditions are also throwing challenges before the companies to get good investments, while weakness in primary market is also making the exit difficult for pre-IPO investors, Sebi Chairman UK Sinha said.
"There are challenges on raising money, on exits and on getting investments at good prices. primary markets have seen substantial decline in India and Asia," he said here during a global conference on venture capital investments.
Amid weak market conditions, the private equity funds, venture capital players and other investors tend to avoid making investments in the companies, as their exits through subsequent Initial Public Offers (IPOs) of these firms become difficult.
The IPO market has been going through difficult times for quite some time and there were only three IPOs, together worth only about Rs 928 crore, in the first two months of the current fiscal 2013-14.
Prior to that, the entire 2012-13 witnessed a total of 49 IPOs for a collective amount of over Rs 15,000 crore, while the fiscal 2011-12 saw 108 IPOs worth Rs 12,800 crore.
In comparison, the fiscal 2010-11 had recorded 80 IPOs worth a total amount of more than 57,000 crore, while there were 72 IPOs worth about Rs 55,000 crore in 2009-10.
While it has been difficult for the companies to raise money through IPOs, the investors have also burnt their hands while investing in the stock markets and many IPOs in the past have seen the value of purchased shares dipping the original investments.
Talking about a recently proposed measure to safeguard some portion of the small investors' money in IPOs through a mandatory safety net mechanism, Sinha said there have been a strong opposition to such a move as some market players feel that such a provision would come in the way of fair determination of market prices.
"We have received strong views against having safety net. Sebi will consider these views deeply and thoroughly. If we are to implement it, we will have more deliberations on the issue," he said.
Sinha also said that Sebi relooking at delisting regulations for the companies looking to delist their shares from the stock market.
"The work has already begun on this front," he said.
On a proposed move to allow 'put and call' options in the mergers and takeovers of listed companies, Sinha said that the government would shortly take a call on this issue.