About Rs 5,855 crore was raised through initial public offers (IPOs) in the first quarter of the current fiscal year, the highest in nine years, signalling a revival in the capital market environment.
According to Prime Database, India’s premier database on the primary capital market, the outlook on public issues for the remaining part of the year looks promising with the regulator having cleared plans of about 19 companies that are aiming to raise over Rs 7,705 crore from the market. There are another five companies wanting to raise about Rs 3,230 crore, currently awaiting SEBI approval.
“A major revival is witnessed in the IPO market after several dismal years. Despite a volatile secondary market, six main-board IPOs came to the market collectively raising Rs 5,728 crore (corresponding period of the preceding year 5 IPOs for Rs 2,280 crore). The highest-ever mobilization through IPOs (April-June) was in 2007-08 at Rs. 13,083 crore,” said Prime Database managing director Pranav Haldea.
Most companies had postponed IPO plans as adverse market conditions stemming from an ongoing global slow down indicated a lack of appetite from investors. Now with the government close to implementing key legislations, including the GST, and a good monsoon likely to boost rural consumption, companies have again revived plans for public floats.
The April-June period also witnessed activity on the SME platforms, with as many as 13 SME IPOs, collecting about Rs 127 crore. In the corresponding period last year, there were nine IPOs that raised Rs 42 crore.
The largest IPO was from financial services company Equitas Holdings that raised Rs 2,177 crore. The average deal size was a high Rs 955 crore.
“A notable feature of the period was that several companies that hit the market had a prior private equity or venture capital investment,” said Haldea. At least three out of six IPOs had prior PE investments, indicating that such investors were able to exit their holdings, which in turn can help the PE investment sentiment in the country. All six companies had anchor investors, which collectively subscribed to 33% of the total issue amount. Domestic institutional investors’ subscription amounted to 21%, compared to 12% from FIIs. Offers for sale by PE/VC investors at Rs 2,292 crore accounted for 40% of the total IPO amount, according to the database.
The period was good for retail investors also. The highest number of applications was received by Mahanagar Gas at 9.58 lakhs followed by Thyrocare Technologies (7.01 lakhs), Ujjivan Financial Services (6.36 lakhs), Equitas Holdings (5.60 lakhs) and Parag Milk Foods (0.81 lakhs).
Offers for sale through stock exchanges, another route for raising public equity money through dilution of promoters’ holdings, saw an increase from Rs 1,610 crore during the corresponding period of the preceding year to Rs 3,033 crore. This was mostly accounted for by the government’s divestment at Rs 2,998 crore.
The largest OFS was that of NHPC in April (Rs 2,735 crore) followed by IOC in May (Rs 262 crore). OFS accounted for 33% of the total year’s public equity markets amount. This is likely to go up soon, Already L&T Infotech is scheduled to raise about Rs 1,233 crore through an OFS on July 11.