In the worst-ever performance of the primary market, only two companies made initial public offerings (IPOs) during the first six months of the current fiscal and raised a minuscule Rs 6 crore, according to Prithvi Haldea of Prime Database.
"Even the two face-saving IPOs this year were more aimed at obtaining listing and not directed at generating any response from the investors," he said and added that the pathetic show has nothing to do with the present crisis consequent to the US terrorist attacks.
According to Haldea, the present dismal performance does not even deserve a comparison. Even the first half of the previous fiscal, which was considered to be bad impacted by an acute nervousness after the Nasdaq crash in April that year, witnessed 83 IPOs for Rs 1,807 crore as per Prime.
The market had continued to behave nervously throughout last year and when the secondary market scam hit the investors in March this year, the doors to fresh capital raising almost entirely closed.
The ratio between approvals and the IPOs has become alarming, Haldea said. Typically, a company rushes to the market as soon as it obtains the Securities and Exchange Board of India (Sebi) approval, that being the last stage in the issue process.
Recently, as many as 35 companies had no option but to let their approvals lapse. Incidentally, Sebi approvals are valid for one year and even in such a long period, these companies could not find any satisfactory time slot.
Prominent among these companies, according to Prime, were Nimbus Communications (Rs 182 crore), Paras Pharmaceuticals (Rs 150 crore), Datamatics Technologies (Rs 100 crore), Western Outdoor Media (Rs 36 crore), Divi's Laboratories (Rs 31 crore) and Radiant Software (Rs 26 crore).
Looking ahead at the remaining half of the current fiscal, there are as of now 43 companies holding Sebi approval planning to collectively raise Rs 1807 crore in equity, according to Prime.
The prominent among these are Punjab National Bank (Rs 320 crore), Eskay K'n'it (Rs 300 crore), Future Software (Rs 200 crore), Godrej Sara Lee (Rs 200 crore), South Asian Petrochem (Rs 180 crore), Mahindra British Telecom (Rs 100 crore), UTV Software Communications (Rs 100 crore), Applitech Solutions (Rs 98 crore) and Manipal Media (Rs 35 crore).
According to Prime, dismayed by the continuing disaster in the market, most of these companies have already announced the deferment of their IPO plans and of tying up of alternative sources of finance. New filings have almost totally stopped and there are at present only three IPOs for Rs 8 crore awaiting the Sebi approval.
In theory, these 46 companies should result in raising a total of Rs 1,815 crore over the immediate few months within the current financial year.
However, given the abysmal level of investor confidence and the south-bound Sensex sentiment, there would be several fall outs.
Interestingly, as per Prime, there are another 375 companies which have publicly announced their IPO intentions to collectively raise over Rs 21,000 crore. The willingness to test their luck with the market would, however, be limited in the present circumstances.
This list includes some prominent corporates with mega issues such as Bharti Televentures planning a Rs 950 crore IPO and Tata Consultancy Services (Rs 1,000 crore offering).
Some of the other mega issuers are Amitabh Bachhan Corporation, I-Flex Solutions, Jyothi Laboratories, Kuoni Travels, LG Electronics, Microland, New Delhi Television and Shantha Biotechnics.
Banks such as Bank of Maharashtra, Canara Bank, Nedungadi Bank, Punjab & Sind Bank, State Bank of Patiala, Union Bank of India and United Bank of India are planning IPOs.
According to Haldea, the myth being propagated that the primary market has died because corporates do not need money is totally belied not only by the huge list of corporates desperate to raise equity but also by their growing dependence on the debt placement market.
In the present circumstances, the silver lining for the primary market, according to Haldea, can appear in the form of public sector companies' disinvestment through the domestic offerings route and by some fundamentally strong private sector corporates willing to forego the price they feel they deserve.
However, for the long run, Haldea feels that it is imperative to take a proper stock of all ills that have affected the primary market, reach a consensus on them and then find speedy, appropriate remedies. The hope that the primary market would revive on its own, like in the past, is now misplaced.
In fact, Haldea suggested that a high priority should be accorded to the revival of the primary market as the growth of the economy is significantly dependent on mobilisation of household savings for investment into industry.
