In a majority of companies which raised money through Initial Public Offers (IPOs) in the past three years, analysis shows less than half the money was used for capital expenditure.
For 47 companies surveyed, a little over 40 per cent (Rs 17,200 crore of the Rs 41,780 crore raised) of the total amount raised was parked in liquid assets (such as mutual funds and deposits with banks). Another 18 per cent or so was used for repayment of debt of subsidiaries, investment in these and for general corporate purposes.
Under the public issue guidelines of 2007, the Securities and Exchange Board of India (Sebi) had compelled companies to give quarterly details in this regard to the stock exchange — a statement indicating material deviations, if any, in the use of proceeds of a public or rights issue from the objects stated in the offer document.
Not yet, we will
The 47 companies had stated they had used around 60 per cent of issue proceeds towards the stated purposes. Our analysis, based on the particulars provided by these companies, show around Rs 14,200 crore, around a third of the total amount raised, went for capital expansion.
Of the 47 companies, 15 said over 90 per cent of the money raised was for the stated purposes. That aside, even in these, only 60 per cent was used for capex. The the remaining 40 per cent was used for debt payment, “general corporate purposes”, investments in subsidiaries and issue expenses.
For example, of the Rs 1,771 crore raised by Mundra Port, Rs 825 crore was used for the coal terminal and SEZ projects, while it made investments of Rs 316 crore in its subsidiary company and a joint-venture project. It had earmarked Rs 586.8 crore for “general corporate purpose” and Rs 43.4 crore as issue expenses.
Another 15 companies indicated 50-90 per cent utilisation of IPO proceeds for the given purpose. Detailed analysis showed utilisation for capex was about 45 per cent. The remaining 16 firms used less than half the funds for the stated purpose. Data analysis showed 20 per cent of the money went in expanding production.
For example, Reliance Power, which mobilised Rs 11,500 crore, has so far used Rs 3,096 crore on the 7,060-Mw ROSA power project.
| FACTFILE | |||||
| Name | IPO amt Issue dates | Utilisation of IPO money (%) | Balance ** | ||
| Rs crore | Total used | Productive* | |||
| Reliance Power | 8-Jan | 11,563.20 | 47.31 | 26.78 | 52.69 |
| NHPC | 9-Aug | 6,038.55 | 43.54 | 10.20 | 56.46 |
| Adani Power | 9-Jul | 3,016.52 | 74.65 | 38.22 | 25.35 |
| Oil India | 9-Sep | 2,777.25 | 54.61 | 53.45 | 45.39 |
| JSW Energy | 9-Dec | 2,700.00 | 53.03 | 34.23 | 46.97 |
| Mundra Port | 7-Nov | 1,771.00 | 100.00 | 46.58 | 0.00 |
| Indiabulls Power | 9-Oct | 1,623.84 | 58.25 | 55.14 | 41.75 |
| D B Realty | 10-Jan | 1,500.00 | 39.59 | 6.76 | 60.41 |
| IRB Infrastruct | 8-Jan | 944.57 | 95.41 | 24.98 | 4.59 |
| Total 46 cos | 2008-2010 | 41,782.17 | 58.70 | 34.03 | 41.30 |
| *As per cent of IPO amount, **Investment | |||||
The companies which made IPOs in 2009-10 are hoping to use the proceeds in the current financial year. NHPC, which raised Rs 6,038 crore in August 2009, has used only Rs 616 crore. It paid Rs 2,013 crore to the ministry of power and invested Rs 3,288 crore.
Godrej Properties, which raised Rs 468.85 crore in December 2009, used Rs 25 crore to fund the acquisition of land development rights and Rs 150 crore for repayment of loans. Oil India which raised Rs 2,777 crore, used Rs 1,484 crore for capex.
