Listing day returns: 40 score in double-digits in three yrs
Firms not backed by private equity investors delivered better returns; PSUS disappointed
Forty companies generated double-digit positive listing day returns during the last three financial years, with non-private equity (PE) backed firms performing better than their Pe-backed counterparts.
Of the 85 initial public offerings (IPOS) to hit the market between FY17 and FY19, 58 ended at a premium to their offer prices, with 40 generating double-digit returns, according to a report by KPMG. Of the 26 firms that generated negative returns, seven delivered double - digit negative returns. In FY19, 10 out of 18 firms yielded 9 per cent negative returns on an average, on listing day.
On an average, 39 Pe-backed companies returned 15 per cent on their listing day, compared to 23.3 per cent delivered by 35 non-pe backed companies. The 11 public sector undertakings (PSUS) listed during this period yielded an average return of -0.1 per cent.
Eighteen IPOS hit the market in FY19, mopping up ~19,900 crore and an average issue size of ~1,100 crore, according to KPMG. The amounts mopped up in FY18 and FY17 were higher at ~76,200 crore and ~28,400 crore, respectively, with an average issue size of ~1,860 crore and ~1,090 crore. The issue size in FY18 was higher by 70 per cent than FY17 and 68 per cent higher than FY19.
Of the 41 listings during FY18, 13 raised less than ~500 crore each, while 14 raised over ~1,000 crore each.
The average listing day gain for 18 firms listed in FY19 was 2 per cent, against 21 per cent for the 41 companies listed in FY18 and 20 per cent for the 26 listed in FY17.
Of the nine sectors that saw more than two listings during the three
financial years, the personal and household goods sector generated the highest listing day returns of 72.1 per cent, followed by construction and material at 18.1 per cent.
About 78 per cent of funds raised were through the offer for sale (OFS) route, and helped provide an exit to promoters and investors. In an OFS, promoters, PE , or venture capital players offload or dilute their stake, effectively leading to a change in the ownership of shares.
“The highs seen in the market in FY18 could be the reason behind significant fund raising through the OFS route; with existing shareholders resorting to monetisation of their holdings and profit-booking at desired levels,” said the KPMG report.
Funds from fresh issuances were primarily used to enhance the capital base. P SUS raised a quarter of the funds over the three-year period, but paid less than 9 per cent of the issue related expenses.
The compound annual growth rate for the Sensex during this period stood at 15.1 per cent, second only to the Nasdaq.
The IPOS with the highest issuerelated expenses belonged to the financial services sector, with five firms spending over ~100 crore each.
Market weakness is coming in the way of firms getting listed on the exchanges. Data sourced from PRIME Database shows that 13 companies have filed for an IPO in the current calendar year, which is 45 per cent lower than the number in the corresponding period last year.
According to experts, the markets have become nervous, owing to concerns among banks over stressed exposures, combined with the sluggish consumer demand — as reflected in the slowdown faced by the auto segment and other sectors.