The prevailing[pri'vey-lin(very common,प्रचलित)] investment pessimism[pe-su,mi-zum(worst feeling,निराशावाद)] , particularly in the industry sector, is reflected in the massive reduction in the amount of capital raised through the primary market in FY 2014-15 compared to five years’ back.One of the major reasons for this shift was the thrust given by the government and regulators for development of the corporate debt market. Interest on debt is deductible from the taxable profits of corporates. Moreover, increase in debt does not change the ownership and management of the company.
While phantasmagoric[fan,taz-mu'gó-rik(unrealistic,अवास्तविक)] pricing of equity issues may have impacted the confidence of investors, costly and cumbersome[kúm-bu-sum(complex,जटिल)] compliance requirements made equity issues a virtual non-starter for many issuers.But this trend has reversed this year.SEBI is taking various steps to provide a favourable marketplace for issuers and investors. The regulator is planning to replace the lengthy IPO prospectus with an abridged[u'brijd(short,संक्षिप्त)] version that is more effective and comprehensible by investors for making investment decisions. This will also reduce overheads of the issuers relating to public issues.
Based on the feedback of prospective issuers and to curtail[kur'teyl(restrict,कम करना)] migration of capital issues, SEBI had allowed ‘electronic IPOs’ with minimal turnaround time for listing.
The entire ecosystem around primary market is going to be much more high-octane(efficient,प्रभावी)] by implementing a system-driven platform for issuance, disclosures and clearances.
The regulator and the exchanges are trying to attract startups to the IPO market by providing a fast track window for listing with diluted disclosure norms. As a consequence[kón-si-kwun(t)s(result,परिणाम)], 2015-16 is the first year of revival in the primary market particularly in the IPOs market; if this trend can be sustained, investors’ participation will push up the primary market.
During the last two years, investors have been with mutual funds. Now given the attractive pricing factor, the primary market will be boosted by retail investors and various government policy decisions and initiatives of the regulator.
The country is likely to see many startups. These businesses would require significant capital infusion at the right time to establish themselves and to encash the potential of their innovation. Currently, the capital needs of these startups are mostly serviced by venture capitals and private equities.An efficient IPO platform shall better serve these businesses with the right size of capital, an exit route for its investors and promoters, and an opportunity to the public to partner in the success of these firms.
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