The primary capital market has witnessed a 60 per cent fall in fund mobilisation with India Inc raising Rs 63,744 crore in 2018 as against Rs 1,60,032 crore in the previous year, indicating the waning investor interest in public issues. However, 2018 was a good year on the divestment front with the government raising Rs 78,143 crore from the market, according to Prime Database.
Fund mobilised through main board initial public offerings (IPOs) declined to Rs 30,959 (24 issues) as against 36 IPOs that raised Rs 67,147 crore in the previous year. Given the correction in the markets in the second half of the year,15 of the 24 IPOs are presently trading below the issue price.
According to Pranav Haldea, Managing Director, Prime Database, not too much action is likely to be seen at least in the first half of 2019 till the conclusion of the national general elections, despite the fact that the pipeline on the IPO front is huge, with 59 companies holding SEBI approval wanting to raise nearly Rs 63,170 crore and another 19 companies wanting to raise nearly Rs 18,067 crore awaiting SEBI approval.
On December 18, addressing the investment bankers summit, Sebi chairman Ajay Tyagi had expressed concern over the slow pace of IPOs hitting the market this year and asked investment bankers to play a key role on the pricing front to draw investors. When asked if the recent halt in the main board IPO is because of pricing, Tyagi said, “merchant bankers have a role to see that IPO issuance is reasonably priced and is acceptable to both issuers and investors.”
On the government divestment front, 2018 was the best year ever with Rs 78,143 crore being raised by the Government. CPSE to CPSE sale at Rs 37,200 crore (48 per cent) constituted a lion’s share of divestment followed by ETFs at Rs 25,325 crore (32 per cent), public offers (IPOs of Bharat Dynamics, HAL, Mishra Dhatu, RITES, IRCON, Garden Reach and OFS of NMDC and CIL) at Rs 13,229 crore (17 per cent), buybacks (SJVN, BEL, KIOCL, NALCO, NLC, Cochin Shipyard and BHEL) at Rs 2,372 crore (3 per cent) and sale of shares to employees at Rs 17 crore (0.02 per cent).
The largest IPO in 2018 was from Bandhan Bank for Rs 4,473 crore. The average deal size was a high Rs. 1,290 crore. Only 6 out of the 24 IPOs that hit the market had a prior PE/VC investment. Offers for sale by such PE/VC investors at Rs.3,242 crore accounted for 10 per cent of the total IPO amount. Offers for sale by promoters at Rs.17,697 crore accounted for a further 57 per cent of the IPO amount, Prime Database said. Out of the 24 IPOs, 17 companies had anchor investors, which collectively subscribed to 32 per cent of the total public issue amount. The domestic institutional investors played a significant role as anchor investors, with their subscription amounting to 16 per cent of the amount, the same as for FPIs, it said.