India Inc’s capital mobilisation through initial public offerings (IPOs) has hit rock bottom as the total amount raised via this route in 2008 aggregated to only Rs 22,100 crore, the lowest in the last three years, says a report.
Capital mobilisation through IPOs witnessed a fall both in terms of volume and value as only 44 transactions worth Rs 22,100 crore were announced, global consultancy firm Grant Thornton said. In 2005, however, there were as many as 64 such deals with an announced value of Rs 27,000 crore, it added.
The total fund mopped up through IPOs in 2008 was 18.34 per cent lower than the amount raised in 2005. Compared with 2007, fund raising has dipped by 54.55 per cent. Fund-raising activity through IPOs reached its peak in 2007, when a whopping Rs 48,600 crore was garnered. Though there was a fall in both value as well as volume, the year 2008 saw several large IPOs across the board including Reliance Power’s Rs 12,590 crore issue - the largest public issue of 2008, Grant Thornton added.
The other big IPOs in the year came from Rural Electrification Corp, IRB infrastructure developers and KSK energy ventures each raising Rs 2,000 crore, Rs 1,156 crore and Rs 1,000 crore respectively. The average size per IPO for 2008 increased from Rs 480 crore in 2007 to Rs 500 crore for 2008.
The month-wise IPO trend shows that the year started on a bullish note and in the month of February 2008 there was maximum activity in this segment but the second part of the year saw a steep decline due to economic downturn, Grant Thornton said. The period between July and December 2008 contributed only 10 per cent to the total IPO value of 2008.
A sectoral analysis shows that power and energy topped the list of sectors for 2008 with 74 per cent of total capital raised, followed by real estate and infrastructure management with 9 per cent.In terms of the number of IPOs, power & energy and real estate & infrastructure management led with five IPOs each.
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The slump in the primary market was due to the poor response to the post-IPO listings in the secondary market and slack investor sentiments due to the overall sluggish market conditions, market observers said.
Meanwhile, according to primary market tracking firm Prime, 37 companies, which were planning to garner about Rs 29,164 crore through IPOs had deferred their plans to enter the market in 2008 due adverse market conditions.