Taking lessons from Paytm's IPO fiasco episode, SEBI is taking a cautious approach while giving clearance to the initial share sales.

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In over last two months, the Securities and Exchange Board (SEBI) of India returned the preliminary papers of half a dozen companies, including Oravel Stays, which operates hospitality chain OYO.

SEBI has asked these companies to re-file their draft red herring prospectus (DRHP) with certain updates.

Apart from OYO, SEBI has returned draft papers of these companies -- Go Digit General Insurance Ltd, a firm backed by Canada-based Fairfax Group; home-grown mobile maker Lava International; B2B payments and services provider Paymate India; Fincare Small Finance Bank India, and integrated services company BVG India, according to an analysis of data with SEBI.

The six companies had filed their preliminary initial public offering (IPO) papers with the regulatory board between September 2021 and May 2022, and their papers were returned between January and March (till March 10).

Together, these companies were hoping to raise at least Rs 12,500 crore.

SEBI has become stricter in its approach while giving its go-ahead to IPOs after investors lost their money in some high-profile initial shares in 2021 and according to data compiled by Primedatabase.Com, the average time taken by the markets regulator in approving an IPO in 2022 was 115 days.

"After the IPO fiasco following the listing of new-age digital companies like Paytm, Zomato and Nykaa in which investors lost heavily, SEBI has tightened the approval norms for IPOs. This is welcome and is in the interest of investors," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

However, ultimately, investors have to apply their minds while applying for IPOs and avoid high-priced issues, he added.

One97 Communications, the parent entity of digital payments firm Paytm, made a disappointing debut on bourses in November 2021.

The company's Rs 18,300-crore IPO was the biggest on Dalal Street after Coal India. The stock of the digital payment firm was still trading 72 per cent below its issue price.

Prakhar Pandey, founder and CEO of Moolaah, believes that the recent move by SEBI gives a strong message to merchant bankers to fully comply with the set of information required to furnish the draft prospectus, and disclose all material information required well in advance, rather than a complete back and forth between the bankers, IPO-bound firms, and regulators.

Earlier, SEBI continued to give grace periods to most firms, to file their full set of compliant documents, which used to lead to a high gestation period, as high as four months as of last year.

This could lead to a big distortion in terms of the IPO price band, he added.

So far this year, only nine companies have approached SEBI with their draft IPO papers amid extremely volatile market conditions and jittery investor sentiment.

Moreover, only two companies -- Divgi Torqtransfer Systems and Global Surfaces -- have floated their initial share sales to raise Rs 730 crore since the beginning of the year, while Udayshivkumar's Rs 66 crore-IPO is slated to open next week.

This came after 38 companies collectively garnered close to Rs 59,000 crore through IPOs in 2022, which was much lower than Rs 1.2 lakh crore mopped up by 63 companies in 2021, which was the largest IPO year in a decade.

The overall collection in 2022 would have been much lower had it not been for the Rs 20,557 crore LIC public offer, which constituted as much as 35 per cent of the total amount raised during the year.

Investors remained jittery throughout 2022 on recessionary fears and rising interest rates amid soaring inflation.

Experts believe that some activity on the IPO front could only be seen in the second half of the financial year 2023-24.

"A host of factors like rising interest rates, a global banking crisis, FPI outflows, slow economic growth, taming inflation, and certain governance issues across large corporations with low earnings and high valuation multiples, are driving factors for the correction in the market.

"These challenges, once fully tackled, is when we might see private companies hitting public markets, probably in the second half of FY24, and existing IPO applications at SEBI might want to wait out this period of lull, to derail these pessimistic market sentiments," Pandey said.

Considering the turbulence in the market now, only attractively priced good companies will get a good response from investors, Geojit's Vijayakumar said.

(With inputs from PTI)