Funds MopUp via Ipo Route Slumps 63 Per cent at Rs 1,264 Cr in H1, 2012

Amid a volatile equity market, India Inc raised a total Rs 1,264 crore through initial public offers in the first half of 2012, sharply down by 63 per cent over that in the same period last year. According to an analysis of data available with the stock exchanges, seven Indian firms raised a total Rs 1,264 crore via IPO route during the six months to June 2012. In the first half of 2011, as many as 22 companies had raised Rs 3,392 crore capital through initial share sales. Market analysts believe that some recovery in the IPO activity would be seen in the second half of the year. Besides, public sector firm ONGC raised Rs 12,000 crore through follow-on public offer (FPO) in the first half of the year. Experts said that many companies were averse to hit the market due to subdued market conditions as well as the fact that firms that did implement their public stake sale plans were trading below the issue price. “There has been a lower appetite among investors for IPO in a weak secondary market, therefore many companies are avoiding this route for fund raising despite having Sebi’s approval. Besides, some firms have shelved their IPO plans due to poor response from investors,” Geojit BNP Paribas Research Head Alex Mathew said. Among the major IPOs of 2012, commodity bourse MCX raised Rs 663 crore, Tribhovandas Bhimji Zaveri garnered Rs 200 crore, Speciality Restaurants raised Rs 176 crore and state-owned NBCC mopped up Rs 127 crore. Other IPOs that entered the market were tutorial firm MT Educare, South-based Olympics Card and non-banking finance company BCB Finance. However, three companies - packaging materials maker Plastene India, healthcare firm Goodwill Hospital and auto parts manufacturer Samvardhana Motherson Finance, shelved their IPOs in 2012 so far citing poor response from the market. These entities were aiming to mop up a total of Rs 1,805 crore from the capital market. Goodwill Hospital again filed draft papers in May this year with market regulator SEBI for the public issue. The company now plans to raise Rs 98 crore through IPO. In the first half of 2011, only one firm specialty chemicals manufacturer Galaxy Surfactants had shelved its IPO. Moreover, at least 22 companies had to give up the approvals they had obtained from the securities market regulator for their IPOs in 2012. These companies were estimated to raise Rs 8,392 crore, according to SMC Global Securities. These companies included Reid & Taylor, Tata Autocomp, Micromax, Embassy Property, Joyalukkas, Lokmat Media, VRL Logistics, Aravali Infrapower, Semantic Space Technologies. “This surely will impact the Indian corporates ability in fund raising to finance their expansion projects resulting in slow down in capacity building and job creation. Further, the government’s disinvestment programme which was supposed to bring public issues of several blue-chip PSUs couldn’t take off. This can also impact the confidence of the public issue market,” SMC Global Head of Research Jagannadham Thunuguntla said. “The secondary market and global liquidity hold key for the future of IPO market,” he added. Even as tough market conditions have forced some entities to shelve their IPOs, five companies, including staterun Rashtriya Ispat Nigam, have filed initial papers for listing in the first two months of this fiscal. During the April-May period of 2012, Rashtriya Ispat Nigam Ltd (RINL), Goodwill Hospital and Research Centre, Fast Train Cargo, Ace Tours Worldwide and C Mahendra Infojewels have filed their respective Draft Red Herring Prospectus ( DRHP) with Sebi for the purpose of launching an initial public offering (IPO). Out of these, Sebi has sought clarification or additional information from the merchant bankers of C Mahendra Infojewels and Goodwill Hospital, as per the information till May 25, 2012 available with the regulator. Most of the companies plan to utilise IPO proceeds for capacity expansion as well as working capital requirements. In April, two companies C Mahendra Infojewels, whose operations include manufacturing and exporting diamond studded jewellery and tour and travel agency Ace Tours Worldwide—filed their draft prospectus. C Mahendra Infojewels is offering 1.3 crore equity shares of Rs 10 each through the IPO. The promoters are looking at divesting 34.21 per cent stake to investors. Besides, Ace Tour Worldwide is planning to raise IPO through issue of 81 lakh shares by diluting 52.88 per cent stake in the company. Interestingly, in 2012, at least 17 companies let lapse the go-ahead from the securities market regulator for their respective IPOs, according to SMC Global Securities. Going ahead, “I expect some recovery would be seen in the second half of the year. The move would seen companies coming out with their IPO plans.”