Although global markets saw Facebook Inc’s initial public offering (IPO), one of the biggest public issues in the US history, this year, India’s primary market failed to garner any major attention in the first half of the year.
Due to volatile secondary market conditions and poor investor appetite for new paper, only eight IPOs were launched in the first half, compared with 19 in the corresponding period of 2011.
Funds raised through IPOs are down more than 60 per cent to Rs 1,311 crore, lowest since 2009, when the market was in a bear grip. All the issues that hit the market this year, barring Multi Commodity Exchange of India Ltd, have been less than Rs 150 crore in size, a sign that large-sized companies are shying away from the market.
| OUT IN THE COLD Fund raising through IPOs has declined sharply in the first half of 2012 | ||
| IPOs | No. of issues | Amount raised (Rs cr) |
| H1 2008 | 30 | 17,946 |
| H1 2009 | 3 | 332 |
| H1 2010 | 27 | 9,656 |
| H1 2011 | 19 | 3,383 |
| H1 2012 | 8 | 1,311 |
| Total | Issues | Amount (Rs cr) |
| H1 2008 | 39 | 21,256 |
| H1 2009 | 15 | 13,780 |
| H1 2010 | 62 | 50,194 |
| H1 2011 | 31 | 26,121 |
| H1 2012 | 23 | 30,349 |
| Total includes funds raised by way of IPO, FPO, QIP, IPP, OFS and block transactions Source: Bloomberg | ||
On the positive side, however, equity fund-raising through other routes like institutional placement programme (IPP), offer for sale (OFS) and block transactions through stock exchanges have done well.
Thanks to a few large transactions like the IPP of Oil and Natural Gas Corp and block transactions of financial institutions like HDFC, ICICI Bank and Kotak Mahindra the total funds raised from the equity market have been about 14 per cent higher to Rs 30,350 crore in the first half of 2012.
“While things continue to remain challenging for the IPO markets, fund raising through fast-track methods like block transactions and newly launched platforms (IPP and OFS) have done well,” said Sanjay Sharma, head-equity capital markets (ECM), Deutsche Equities India. “In the second half, too, we could see companies tapping these routes more often than full-blown IPOs.”
To be sure, the overall fund raising has shown growth due to large block transactions seen in February on healthy foreign investor inflows.
“February was an aberration. As $5 billion (around Rs 28,000 crore on Wednesday) of FII (foreign institutional investor) money came into the market, we saw few large block transactions. If we take February out, there have been hardly any transactions,” said
V Jayasankar, senior executive director and head of equity capital markets at Kotak Investment Banking.
Investment bankers say the moribund IPO market is not just an Indian but a global phenomenon. According to Bloomberg data, stock market flotations globally, too, are down close to 50 per cent in the first half of the year. Also, several IPOs in the US and Hong Kong were withdrawn or postponed, including the $ 1-billion offering of luxury jeweller Graff Diamonds.
“Hong Kong, which is the busiest listing market, has seen withdrawal of huge IPOs,” says Jayasankar. “Globally, there are strong headwinds against primary issuances. A lot of problems need to be addressed first for the primary market conditions to become conducive.”
India, too, has seen three IPO withdrawals in the first half, including the Rs 1,660 crore offering of Samvardhana Motherson Finance. Besides these, over a dozen companies have failed to launch their public offerings despite having all the approvals in place.
“Investor interest in the primary market is at a low and the outlook looks very feeble and uncertain,” said Girish Nadkarni, head-ECM, Avendus Capital.
