Equity supply likely to hit all-time high of ₹1.5 lakh crore in 2017-18

MUMBAI: The supply of equity to the Indian markets may cross ₹1.5 lakh crore in fiscal year 2018, logging a new all-time high on the back of two major state-run insurers tapping the market, Credit Suisse said. Initial public offerings (IPOs) at ₹61,700 crore in 2017-18 could be 35% higher than the previous peak seen in 2007-08, the securities house said in a report on Wednesday.

Two state-run insurance companies—New India Assurance Co and GIC of India—filed their draft red herring prospectuses last week. There are expected to raise ₹10,000 crore each.

Of the anticipated ₹1.5 lakh crore supply in the current fiscal year, ₹50,300 crore is already in, the report said.

Also, around 85% of the supply is expected to be in financial services or through government’s disinvestment plans.

SBI Life Insurance Co Ltd and ICICI Lombard General Insurance Co Ltd too, have filed their papers to raise around ₹7,000 crore and ₹5,000 crore, respectively. Meanwhile, HDFC Standard Life Insurance Co Ltd’s IPO is also expected to be filed soon.

With valuations still elevated, the list may grow, particularly with the expiry of lock-in for investors in firms that were listed last year, the report said.

The expiry of lock-in for investors in companies that were listed last year could bring in more supply and financial services dominate here too, given the strong issuances in that space in the previous year. “As a new sector with good potential opens up, flows may pick up from current levels, even if only to match an increase in India’s weight,” Credit Suisse analysts Neelkanth Mishra and Prateek Singh said.

“Financials are going to rule fund raising in the new year. Either existing private equity partners or strategic partners want to sell down and exit, and to that extent we will not see funds being used towards expansion plans,” said Utpal Oza, MD of investment banking at Nomura Financial Advisory and Securities (India) Pvt Ltd.

Some experts were of the view that issuance of equity in such high quantities will help the economy. “I would think that such huge issuances there would be wealth creation in the market, and which will help the economy ,” said VikasKh em a ni, CEO of Edelweiss Securities Ltd.