Fundraising via public listing at record high

So far in 2017, 28 companies have collectively mopped up ~44,853 cr

With the initial public offering (IPO) of General Insurance Corporation of India (GIC Re) getting fully subscribed, fundraising through the IPO route has hit a record high in 2017, crossing the ~40,000crore mark.

Thus far in the calendar year 2017 (CY17), 28 companies have collectively mopped up ~44,853 crore through IPOs, surpassing the previous high recorded seven years ago. In the entire CY10, as many as 64 companies had raised ~37,535 crore via IPOs.

Twenty-four companies raised ~30,853 crore in the first nine months of CY17, data from Prime Database shows. In October, four companies — Godrej Agrovet, MAS Financial Services, Indian Energy Exchange, and GIC Re — have collectively mobilised around ~14,000 crore, totalling ~44,853 crore in CY17.

The amount is 82 per cent higher compared to the same period last year, when 24 companies mobilised ~24,653 crore from the primary market. In the entire CY16, 26 firms raised ~26,494 crore, the data shows.

Among sectors, financials, including housing finance and insurance companies, have cornered nearly two-thirds share, or about ~30,000 crore, of the total fund raised thus far in CY17. The companies from the sectors like construction, trading, and pharmaceuticals raised over ~1,000 crore though IPOs.

Analysts say the positive secondary market sentiment has rubbed off on the primary market as well, with 12 of 24 companies debuting on the exchanges this year listing at over 10 per cent premium against their respective issue price.

“Promoters are making use of the bull run in the secondary market to raise funds via the IPO route. Valuations for a lot of midcap companies have improved over time, and promoters are using this opportunity to tap the market for funds, including micro-finance companies, non-banking financial companies (NBFCs) and private banks,” says G Chokkalingam, founder and managing director, Equinomics Research.

Avenue Supermarts (owner of the D-Mart brand), Central Depository Services (India) or CDSL, Shankara Building Products, Apex Frozen Foods, and PSP Projects have seen their market value more than doubled from their issue price. Dixon Technologies, AU Small Finance Bank, Capacit’e Infraprojects, Housing and Urban Development Corporation, and Cochin Shipyard were up in the range of 30 per cent to 65 per cent against their issue price.

With the economic cycle likely to witness an upturn going ahead, analysts expect more companies, especially from the banking and NBFC space, to hit the primary market. This, they feel, will also be led by the need for capital for expansion.

“Credit growth is likely to pick up over time given the formalisation of the economy. That apart, consumption and penetration levels of corporates (into rural India) are going up. For this, corporates, including banks and NBFCs, will need funds to grow. The unlisted ones, as a result, will tap the markets to meet this requirement,” says Vinay Khattar, associate director and head of research at Edelweiss.

On the other hand, big-ticket IPOs like SBI Life Insurance Company, ICICI Lombard General Insurance Company, and Eris Lifesciences have underperformed the market by recording single digit or negative return post their listing.

“A lot also depends on the IPO pricing as well. For these insurance companies, the pricing was aggressive and left little for the investors on the table. As a result the IPOs have underperformed,” Chokkalingam said.