India's market regulator, under pressure to tighten scrutiny, is taking as long as a year to approve initial public offerings, prompting criticism from firms already grappling with unpredictable demand and a lack of alternative funding sources.
India's stock market has soared, touching record highs last month. It was Asia's second-best performer last year, thanks largely to more than $16 billion of foreign investment.
But the boom has failed to translate into many IPOs, a vital source of capital especially for small companies which make up the bulk of the economy yet often struggle to access keenly priced bank loans.
Money raised from public offerings has dropped from a peak of $8.47 billion in 2010 to just over $250 million so far this year, according to Thomson Reuters Data.
Investor demand has been lukewarm, and India has seen lacklustre debuts in 2015. Private equity firms, key drivers of the market, have also struggled to exit through listings that would in many cases crystallize losses.
But some bankers and companies say delays in the review of listing documents by the Securities and Exchange Board of India (SEBI) are complicating the listing process, jeopardizing billions of dollars of extra liquidity for Indian shares.
"Getting an approval takes a lot of time, and after that, unless you have four or five merchant bankers willing to underwrite the whole issue, it becomes very difficult to raise money," said Nevil Savjani, vice president at boutique merchant banker Corporate Strategic Allianz.
Savjani advised edible oil producer NCML Industries on a $10 million listing that was shelved in January. SEBI took 18 months to approve that prospectus.
"SEBI's guideline is that they approve it within 30 days, after an in-principle nod from the stock exchanges. But generally, if you look at any of the IPOs it takes it at least one year."
The time regulators take to approve listing prospectuses can vary depending on everything from the quality of the document to the amount of IPOs in the pipeline. But Hong Kong, for example, typically takes a month or two, and no longer than six months.
Documents withdrawn or lapsed
A SEBI spokesman did not comment on market participants' complaints that it was slow to approve IPOs.
But officials said privately that the regulator was under pressure to avoid failures that could burn India's army of retail investors, stretching already limited resources.
It also wants to prevent a repeat of cases like property developer DLF, penalised by SEBI last year for disclosure problems around its record 2007 listing. The penalty was overturned on appeal.
Close to 700 billion rupees ($11.2 billion) of approved offer documents have either been withdrawn or lapsed in the last five years, according to a SEBI official who declined to be named.
Inox Wind, an alternative energy firm which began trading this month, had to wait for a year before its listing plans were approved. Its bankers, awaiting a favorable moment, took another eight months to get the shares to market.
"They (SEBI) have been ... very slow and that's been a trend with the entire bureaucratic process in India," said Devansh Jain, a director of Inox Wind.
For a handful of larger companies, the alternative is to raise cash abroad.
Satellite TV company Videocon d2h withdrew its pending IPO prospectus last month after waiting for two years to go public. Instead it listed on the Nasdaq through a reverse takeover.
For small firms the problem is tougher. Many are struggling to raise affordable funding from banks, themselves battling with hefty piles of soured loans.
SEBI has long struggled with balancing the needs of small investors and those of the market.
In 2012, SEBI considered making it mandatory for underwriters to buy back shares from retail investors if a company's shares fell below the IPO price. The regulator later shelved the plan after facing stiff resistance from bankers.