Reflecting the weakness in the broader market and weak investor sentiment in companies beyond the bluechip stocks, the Indian primary market witnessed lowest activity in the last five years. Fund raising through initial public offering (IPO) in 2019 stood at Rs 12,362 crore, lowest since 2014 when companies raised Rs 1,201 crore through IPOs.
According to data collated by Prime Database, while the amount raised through IPOs in 2019 was down 60 per cent from Rs 30,959 crore raised in 2018, it is significantly down from Rs 67,147 crore raised in 2017. The year saw only 16 initial public offerings (IPOs) as against 24 in 2018 and 36 in 2017.
What is more worrying is the fact that during 2019, 47 companies that looked to raise over Rs 51,000 crore allowed their Sebi approval to lapse, despite approvals being valid for a period of one year and after having incurred a lot of time and costs.
During the calendar year (till date), while the benchmark Sensex at the BSE rose 14.1 per cent, the broader market has remained weak. While the mid cap index has lost 4.1 per cent this year, the small cap index fell 8.6 per cent. This reflects that the investors are only comfortable with investment in large companies that are better positioned to weather the weakness in the economy. Earlier, the data released by the government showed that the GDP growth for the second quarter ended September 2019 stood at a six-year low of 4.5 per cent.
However, driven by offer-for-sale (OFS) and qualified institutional placements, the street saw 28 per cent growth in overall fund raising at Rs 81,174 crore in 2019, against Rs 63,651 crore in 2018 but this is 49 per cent lower than the all-time high of Rs 1,60,032 crore raised in 2017, says Pranav Haldea, managing director at Prime Database Group.
The year 2017 saw 36 IPOs mopping up Rs 67,147 crore, while 2016 saw 26 issues collecting Rs 26,494 crore and Rs 13,614 being raised in 2015 through 15 issues and 2014 being the worst at Rs 1,201 crore from five IPOs, show the data. The largest IPO in 2019 was from Sterling & Wilson Solar which raised Rs 2,850 crore, while the average issue size was Rs 773 crore.
Only three of the 16 IPOs that hit the market had a prior PE/VC investment, a notable change from previous years. OFS by such PE/VC investors stood to Rs 803 crore, accounting for just 6 per cent of IPO amount. OFS by promoters stood at Rs 7,513 crore, or 61 per cent of total IPO amount.
Seven IPOs got mega responses of over 10 times (IRCTC at 109 times followed by Ujjivan Small Finance Bank 100 times), CSB Bank 48 times, Affle 48 times, Polycab 36 times, Neogen Chemicals 29 times and Indiamart Intermesh 20 times), one issue was oversubscribed by over three times, and seven were oversubscribed between one and three times.
But from the listing side, the year was good for IPOs with strong debut trade. Of the 15 IPOs which got listed, seven gave a return of over 10 per cent, based on closing price on listing date. IRCTC gave a stupendous return of 128 per cent, followed by CSB Bank (54 per cent), Ujjivan (51 per cent), Indiamart Intermesh (34 per cent), Neogen Chemicals (23 per cent), Polycab (22 per cent) and Affle (17 per cent).
Significantly, unlike in previous years, only two IPO stocks are trading below the issue price now with the rest 13 stocks trading between 21 per cent and 170 per cent above the issue price as of December 23.
For the first time since the SME platform started five years ago, the IPO activity declined in 2019 as there were only 50 SME IPOs in the year collecting a paltry Rs 621 crore as against 141 issues in 2018 worth Rs 2,287 crore and 133 issues in 2017 raising Rs 1,679 crore and 67 issues raising Rs 537 in 2016 and 43 issues raising Rs 260 in 2015 and 40 IPOs collecting Rs 267 crore in 2014.
The OFS to dilute the promoters’ holding saw a huge increase from Rs 10,672 crore raised in 2018 to Rs 25,811 crore in 2019. Of this, government divestment accounted for Rs 5,871 crore or 23 per cent of the total led by it diluting its stake in Axis Bank in February worth Rs 5,358 crore, followed by SBI Life (Rs 3,524 crore) and HDFC Life (Rs 3,366 crore).
OFS accounted for 32 per cent of the total public equity markets amount in the year.
The street saw 11 companies mobilising Rs 35,238 crore through QIPs, which is 112 per cent more than Rs 16,587 crore raised in 2018. The largest QIP of 2019 was from Axis Bank raising Rs 12,500 crore, accounting for 35 per cent of the total QIP amount. QIPs were dominated by banks, NBFCs and realty companies accounting for 87 per cent (Rs 30,688 crore) of the overall amount. InvITs/ReITs also saw good traction with the year seeing the first ever ReIT listing by Embassy Office Parks raising Rs 3,874 crore.
The overall amount raised through InvITs and ReITs was 127 percent more than in previous year. Of the total Rs 81,171 crore, fresh capital was Rs 45,937 crore or 57 percent and the remaining Rs. 35,234 crore being offers for sale. But the year was bad for divestments as against the budgeted Rs 1,05,000 crore on Rs 17,744 crore or 17 percent has been achieved till date.
According to Haldea, the IPO pipeline continues to remain strong with 21 firms holding Sebi approval to raise Rs 18,700 crore and another 13 wanting to Sebi not to raise Rs 18,000 crore.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines