In the about-to-end fiscal year 2010-11, Rs 46,267 crore were raised through public equity issues, according to PRIME database, a leading database provider on primary capital market. This is the third-highest amount raised in a single financial year as per PRIME. The highest amount at Rs 52,219 crore was raised in 2007-08 and the second-highest at Rs 46,941 crore was raised last financial year, that is 2009-10.
The mobilisation of funds in the year could have been higher. But the deferment of some large public sector undertaking' (PSU) offerings and the volatility in the secondary market, especially in the last quarter of the year played spoiler. So while, Rs 29,514 crore were raised in the third quarter, the fourth quarter saw mobilisation of only Rs 4,468 crore.
PSUs and PSU banks dominated the year with a total raising of Rs 27,537 crore or 60 per cent of the total amount raised as per Prithvi Haldea, CMD, PRIME Database. Of this amount, Rs. 22,763 crore was through divestments and Rs 4,774 crore through fresh capital. A total of seven PSUs entered the market during the year, led by the Coal India (Rs 15199 crore) initial public offering (IPO), largest-ever in the Indian capital market till date. It single handedly accounted for 33 per cent of the funds mobilised in the primary markets this year. The other IPOs were from MOIL (Rs 1,238 crore), SJVN (Rs 1,063 crore) and PSB (Rs 471 crore). The other three were follow-on public offers (FPOs) by PGCIL (Rs 7,442 crore), SCIL (Rs 1,165 crore) and EIL (Rs 960 crore).
According to PRIME, a total of 57 public issues entered the market during the year, compared to 44 issues in the preceding year, meaning a 30 per cent increase.
The average deal size, however, fell to Rs 811 crore from Rs 1067 crore in the preceding year, though it was still the second highest ever. There were as many as 10 issues of above Rs 1,000 crore. On the other hand, like the previous years, there were only 6 issues of less than Rs. 50 crore, and no issue of below Rs 10 crore during the year, the smallest issue being Rs 29 crore. The market for small companies, therefore, continued to be non-existent, and the market regulator, Securities and Exchange Board of India's (Sebi) efforts to promote small and medium enterprises (SME) exchanges have been a non-starter.
As per PRIME, only 45 per cent or Rs 21,065 crore was raised through fresh capital ,which typically goes into creation of productive assets, with the remaining Rs 25,201 crore raised through offers for sale where the proceeds go to the sellers-government, promoters, venture funds and other investors and not to the company.
In terms of method of offering, 55 of the 57 issues of the year, as per PRIME, were through the bookbuilding route cornering over 99% of the amount, with only 2 small issues through the fixed price method.
The facility of anchor investors was used by 21 companies, who on the whole allocated 30% of the amount reserved for the QIBs.
According to Haldea, ASBA failed to make its mark even in 2010-11. Despite 4 years in operation, only about 20 per cent of applications of retail investors came through this route.
The response from the public to the equity issues of the year was on the whole good, according to Haldea. As many as 35 issues were oversubscribed by more than 3 times. This included the Coal India’s largest IPO eliciting 15 times oversubscription. The highest oversubscription was received by MOIL at 56 times, followed by PSB at 50 times and Gravita at 42 times. However, 2 companies had to revise their price bands due to poor response (BS Transcomm and Claris). At the extreme were 2 IPOs that failed to elicit response from the public and had to be withdrawn (Fatpipe and Tara Health).What emerged clearly was the selective interest, and not frenzy, of the retail investors.
The year also broke another record, that of the highest amount ever collected as application money. Coal India with Rs 2.33 lakh crore beat Reliance Power’s previous record of Rs 2.25 lakh crore.
Most IPOs of the year gave excellent returns on listing, as per PRIME. The market structure requiring compulsory validation of each offering by QIBs meant good news for the retail investors. That some IPOs subsequently fell below their offer prices was more a function of the secondary market crashes and rerating of certain sectors.
According to PRIME, the year, like last year, did not witness a revival of the regional stock exchanges. All IPOs went for listing only at the national exchanges, with BSE getting all 52 IPOs and NSE getting 47 of these.
In addition to equity issues, the year saw a much greater activity in the public bonds market, according to PRIME. As many as 10 issues raised over Rs 17,000 crore, compared to 3 at Rs 2,250 crore last year.