Speaking on the sidelines of an investment outlook summit on Thursday, the Sebi chairman said the corporates had let initial public offerings (IPOs) worth about R60,000 crore lapse in the last three years, highlighting the difficulties they were facing in raising money from the public.
Indias primary market had been rather muted in last 3-4 years. Sebi has cleared DRHPs, but the corporates have decided not to raise money and allowed the approval to lapse. It shows the appetite for raising capital has been low, said Sinha.
As per Prime Database, IPOs worth R1,204 crore had hit the market in FY14, an 11-year low. Just Dials R919 crore IPO was the only major IPO to see the light of the day in FY14.
The only other major issue Loha Ispaats recent R205 crore IPO remained undersubscribed. FY13 and FY12 were comparatively better with total IPO collections of R6,497 crore and R5,892 crore respectively. While big issues have been conspicuous by their absense, SME IPOs have gained traction, with FY14 seeing over 35 SME IPOs. Sinha complemented BSE on the success of the BSE SME platform. Creating companies with a market cap in excess of 1 billion dollars is a huge achievement and a matter of great satisfaction for all of us, said Sinha. The market capitalisation of 55 companies listed on BSE SME platform exceeded the $1-billion mark on April 4, 2014.
The Sebi chairman said the regulators initiative to allow small firms to raise money without listing was beginning to bear fruit. I am happy to say that within six months, three companies have listed through this route on BSE. I expect that once this platform succeeds, more qualified institutional bidders, PEs and VCs will use this platform as they can find better better price discovery, said Sinha. The guidelines to list specified securities on the Institutional Trading Platform of a recognised stock exchange without an IPO were issued in October 2013.
Sinha said he was in favour of increasing the timings of the currency market from 5 pm to 7.30 pm as this would help the corporates to better hedge their portfolio. Speaking on corporate governance issues, Sinha said the regulator would particularly focus on the issue of 'related party transactions'.
Sinha said the regulator was in a constant dialogue with other regulators to ensure that an investor wanting to invest in different segments of the market did not have to go through several KYCs. He added the regulator was working on implementing a common account statement for investors, where they could view their investments in various market instruments be it mutual funds, insurance or stocks on a single sheet.
Sinha said the market regulator was working on guidelines on crowd-funding to encourage young entrepreneurs to raise capital from the market smoothly. In last two years, Sebi had opened 16 offices to deal with investor grievances, Sinha said.
Demat accounts grow slowest in 12 years at 4%
Demat accounts in FY14 grew at slowest pace in last 12 fiscals, even as the Sensex clocked its best returns in four financial years. In FY14, the combined number of demat accounts on the two depositories Central Depositories Services (CDSL) and National Securities Depository (NSDL) stood at 2.18 crore or an increase of 3.9% y-o-y.
Experts believe the sluggish growth of demat accounts reflects lack of investors confidence in the economy. Retail investors are not yet upbeat on the economy. The government should launch better schemes to attract retail investors. With the existing set of domestic investors taking their money out of the capital markets, demat accounts are unlikely to grow at any faster pace in the foreseeable future, said UR Bhat, the managing director, Dalton Capital Advisors. Domestic institutional investors (DIIs) have sold more than $3 billion worth of equities in year to date.
The number of new demat accounts have been growing at a slower pace since FY09. After seeing a jump of more than 35% in FY08, new accounts grew by 7% in FY09. In the following years FY10 (12.86%), FY11 (10.79%), FY12 (4.95%) and FY13 (5.25%) the growth has remained subdued.
Meanwhile, in their bid to deepen the financial markets, the government and market regulator Sebi are trying to increase the number of demat holders. Presenting the interim budget in February, finance minister P Chidambaram had proposed single demat account for all investments. We want to create one record where all financial assets are held in de-materialised form. One FSDC (Financial Stability and Development Council) approves the report (on the issue) then we will implement it. Regulators had agreed that financial records must be available in one record," he said.
With a view to achieve wider financial inclusion, we encourage holding of demat accounts and to cut the cost of maintaining securities in demat accounts for retail individual investors, it has been decided all depository participants shall make available a Basic Services Demat Account" with limited services and cut costs, Sebi said in a circular dated August, 2012.