The year 2017 proved to be the best-ever in the Indian equity market in terms of money raised through public issues, with 36 firms raising almost ₹67,000 crore. That is more than the cumulative total raised in six years till 2016 when 103 firms entered the market to raise a little more than ₹55,000 crore.
Interestingly, the record mobilisation was primarily due to the insurance sector which saw some of the largest entities entering the capital market this year. The top five public issues of the year — totalling close to ₹44,000 crore — were all from the sector, namely, General Insurance Corporation, New India Assurance, HDFC Standard Life Insurance, SBI Life Insurance and ICICI Lombard General Insurance, as per data from Prime Database.
“Some large offerings from the insurance sector made it a record year,” said Subhrajit Roy, executive director & head of ECM origination, Kotak Mahindra Capital. “If you exclude those big IPOs, then 2017 was similar to the last couple of years. A good thing was that new sectors were discovered in the process,” he added.
‘Foreign flows positive’
“There was an overall optimism in the secondary markets and foreign flows though volatile were largely positive that led to many companies hitting the market,” he said.
A recent note from Motilal Oswal Financial Services attributes the record mobilisation to the optimistic market mood and strong fund flows amidst which the key indices delivered positive returns.
Incidentally, the BSE Sensex has risen almost 28% in the current calendar year, which is the best return for the benchmark since 2014 when it gained close to 30%. While the Sensex lost a little more than 5% in 2015, it ended almost flat in 2016 with a gain of less than 2%.
Further, the year 2017 has, till date, seen foreign flows totalling almost ₹49,000 crore, or more than double the ₹20,568 crore seen last year. The optimism was not limited to large firms but was also seen on the platform created for small and medium enterprises (SMEs). The year saw 133 SMEs listing, raising a record ₹1,785 crore — higher than the cumulative amount raised since the platform was introduced in 2012 till 2016.
The segment showed further signs of maturity with companies raising, on average, more than ₹40 crore — a stark deviation from earlier years when the average issue size on the SME platform was in the range of ₹20-30 crore. The year’s biggest SME IPO was that of Zota Health Care with an issue size of ₹55 crore. Euro India Fresh Foods, Jash Engineering and One Point One Solutions all entered the market with an offering size of more than ₹40 crore.
The market saw unprecedented buoyancy backed by strong domestic demand, with SMEs seeing good performance post listing as well, said Mahavir Lunawat, MD, Pantomath Capital Advisors, an investment banking entity in the SME space.
Future positive
Most market participants expect the optimism to continue in 2018 as many companies are in the pipeline to hit the capital market in the coming months.
According to Prime Database, issues worth more than ₹12,000 crore are waiting on the sidelines with all regulatory approvals in place. Further, there are about eight companies with a cumulative issue size of close to ₹18,000 crore waiting for approvals from the Securities and Exchange Board of India (SEBI).
A note from State Bank of India said the rise in IPOs presented a good picture for corporates as it represents a better option for raising money. Some names in the pipeline include Hindustan Aeronautics, Nakshatra World, ICICI Securities, National Stock Exchange and Reliance General Insurance.
“The trends will continue in 2018 as there is already a pipeline of around ₹50,000 crore. Importantly, the year is expected to see companies from more diversified sectors and not too much concentration in terms of size and sectors,” said Mr. Roy.
