Mumbai: Many companies cutting across industries face the risk of missing a one-year deadline to complete planned share sales, meaning they would have to go through the regulatory hoop again when they decide to eventually tap the capital market.

Reliance Infratel Ltd, the telecom tower unit of Reliance-Anil Dhirubhai Ambani Group (R-Adag), will be the first to miss the deadline, having received approval from the Securities and Exchange Board of India (Sebi) for its initial public offering (IPO) on 11 January 2010. It had been planning to raise Rs5,000 crore.

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For a variety of reasons, companies, including Reliance Infratel, real estate builder Lodha Developers Ltd and drug maker Glenmark Generics Ltd, failed to proceed with capital raising plans in a year the Bombay Stock Exchange’s benchmark Sensex ended with a 16.8% gain, making it the best performer among emerging markets, fuelled by a record $28 billion (Rs1.25 trillion) of foreign institutional investment.

Sebi’s approvals of IPOs are valid for a year. If a company fails to raise money within this period, it has to file a new prospectus with updated financials.

Reliance Infratel is likely to move the market regulator again for approval to enter the market.

“We’re planning to refile the application for an IPO..," said an official at R-Adag, who declined to be identified. The company is in the process of finalizing its fund-raising strategy, the official said.

“It is, however, difficult to say whether the IPO will happen this year," the same official added. An email sent to Reliance Infratel last week elicited no response.

Reliance Infratel put off the IPO last year after a planned merger with GTL Infrastructure Ltd to create an independent transmission network with around 80,000 cellphone towers and valued at Rs50,000 crore fell through.

After the deal was cancelled, Reliance Infratel needed to take a “fresh look" at its capital-raising plans, said the R-Adag official.

Lodha Developers, Glenmark Generics and other companies are also staring at IPO deadlines.

The regulator’s approval for a Rs2,500 crore share sale by Mumbai-based Lodha Developers is valid until 20 January. Glenmark Generics’ approval is valid until March, but Glen Saldanha, managing director and chief executive, said the IPO is “shelved for now".

S. Subramanian, head of investment banking at Enam Securities, the merchant banker for Lodha Developers, said: “We will take a call on that (refiling) soon."

A number of real estate firms have stayed away from the market because investor sentiment towards the sector has not improved. The recent loans-for-bribes scam, in which some realty firms allegedly received loans in return for kickbacks to officials at banks and other institutions, has made things worse for the sector.

Ambiance Ltd and Kumar Urban Development Ltd are other real estate companies that are likely to require refiling for Sebi approvals. Ambiance’s approval expires on 4 February while Kumar Urban has time until 21 March.

These firms filed their offer documents with Sebi last year along with real estate companies such as Sahara Prime City Ltd and Emaar MGF Land Ltd. Emaar MGF filed its prospectus in October 2010 for the third time. Sahara Prime City has not received the regulator’s approval yet.

“Last year most of the companies which could not launch their IPOs belonged to the real estate sector. That’s because qualified institutional investors are still not very confident about the transparency in the real estate sector," said Gyan Mohan, executive vice-president and head (investment banking) at IDBI Capital Market Services Ltd.

If institutional buyers are not confident about a share sale, the chances of retail participation decline, unless the company is a big brand. “I don’t see that trust coming in the real estate sector anytime soon," said Mohan.

Companies across sectors understand that the investors are not gullible and they assess the quality of issues and future growth prospects very carefully, he said.

“Unlike in 2005-07, when the real estate sector dominated the IPO market, 2010, like 2009 and 2008, continued to be severe on this sector, with its share being only 7% of the money raised," said Prithvi Haldea, chairman and managing director of Prime Database Ltd, a Delhi-based primary market tracker.

The mining sector dominated 2010, cornering a 38% market share, followed by the power sector (26%).

To be sure, things could change for the better for the real estate sector, some investment bankers said. For instance, A. Murugappan, executive director at ICICI Securities Ltd, is bullish on select real estate companies that are planning IPOs.

“I believe the demand in the residential real estate segment has not slowed down," he said. “In fact, the number of genuine buyers in this segment has increased now and that should make it easy for companies to raise money."

According to him, well-known real estate firms with the major chunk of their business in Mumbai and Delhi should do particularly well, but pricing will remain an important factor in investor response to their issues.

In 2010, 72 public issues raised at least Rs69,000 crore. As of 31 December, 35 new issue proposals had received approval; collectively they could raise about Rs35,000 crore. Another 65 companies have filed their prospectuses and are awaiting the market regulator’s approval.

Investment bankers say the market sentiment is positive and many of these issues will sail through.

Mohan of IDBI Capital said there was enough liquidity and appetite for primary issues in 2011, but their success will continue to depend on pricing, the sectoral outlook and secondary market performance.

In December 2008, Sebi had extended the validity of approvals to one year, after many companies shelved their IPO plans in the wake of the collapse of US investment bank Lehman Brothers that led to an unprecedented global credit crunch.

Many firms that had scrapped their IPO plans earlier entered the market last year after seeking fresh approvals. According to Prime Database, 13 companies refiled their offer documents and raised money in 2010.

Graphic by Ahmed Raza Khan/Mint