2016 turns third ‘richest’ year for IPOs


The year 2016 was the third-best since 1989 for initial public offers (IPOs) in terms of total funds raised, even though the number of public issues was far less compared with many of the earlier years.

Data from Prime Database, a primary market tracker, showthat a total of 25 companies entered the capital market with their IPOs to raise a cumulative sum of Rs.25,163.33 crore in 2016. This is the third-highest quantum raised in a single calendar year after 2010 (Rs.37,534.65 crore) and 2007 (Rs.34,179.11 crore).

Almost double

Incidentally, the funds raised in 2016 were almost double that of the previous calendar year when a total of 21 issues mobilised Rs.13,614.08 crore.

Merchant bankers attribute the trend to the strong profile of the companies that entered the capital market in 2016 along with the huge appetite that both foreign and domestic investors showed for new paper floated by Indian companies even as the secondary markets turned volatile in the last few months.

“There were a lot of good quality, less leveraged companies that launched their IPOs that also led to a trend of issues doing well post-listing,” said Subhrajit Roy, executive director, Kotak Investment Banking.

“Even as the secondary markets went choppy in the recent past, the primary market managed to register traction and perform well in the secondary market as well. The appetite among FIIs continued strong even as they have been net sellers in secondary markets in the last couple of months,” added Mr. Roy.

Some of the large-sized issues that hit the market this year were ICICI Prudential Life Insurance Company, L&T Technology Services, PNB Housing Finance, RBL Bank, Mahanagar Gas, Ujjivan Financial Services and Infibeam Corporation.

Interestingly, the year was marked with large-sized offers with the average issue size pegged at approximately Rs.1,007 crore. Prime Database has been maintaining IPO data since 1989 and this is the first time that the average size has crossed Rs.1,000 crore mark.

“Domestic and foreign investors found India a growth market and showed good appetite resulting in the IPOs getting good acceptance throughout the year,” said Ajay Saraf, executive director, ICICI Securities. Even retail investors saw equity as an attractive option at a time when interest rates were falling, he added.

Meanwhile, bankers are hoping that the positive trend will continue in the next year as well though they add that the recent demonetisation move of the government might impact the appetite in certain sectors, especially those that are directly impacted by discretionary spends of consumers.

“The trend should continue in the next year as well though there might be some softening due to the demonetisation factor. Companies from consumer discretionary sector might see an impact though demonetisation has led to a positive shift from unorganised to organised segments,” said Mr.Roy.

Demonetisation boost

According to Mr.Saraf, the demonetisation move might actually boost the investments in equity as more money would come within the formal channel and those with an investment horizon of 4-5 years would look at equity as an attractive investment avenue.

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Printable version | Jan 21, 2020 11:58:57 AM |

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