Despite buoyancy in the initial public offerings (IPOs), primary fundraising continues to remain elusive as companies are increasingly using the route to provide exits to private equity investors. During the current financial year, 25 companies have raised Rs 28,220 crore through IPOs. Of this only Rs 8,450 crore or 30 per cent was fresh capital raised while the rest was offer for sales (OFS). In terms of a proportion of fresh capital raised, this is the worst fiscal ever, Prime Database showed.
Market participants say India Inc. is currently going slow on capital (capex) expansion as there is a slowdown in the capital-intensive sectors such as metals, infrastructure and power sectors. In fact, during last financial year, there wasn’t even a single company from these sectors coming up with an IPO.
“Companies are not in an expansion mode currently. In fact, the majority of the sectors are operating below optimal capacity utilisation. I don’t think companies would look to raise fresh capital until there is a recovery in earnings and revival in the demand,” said G Chokkalingam, managing Director, Equinomics.
Investment bankers say IPOs are no longer the first resort for companies to fund their expansion plans. These days, India Inc. is increasingly looking at private equity (PE) and venture capital (VC) funds to fund their expansion needs. For companies with good credit rating, the bond market has also become a viable route for fundraising. This has led to a steep decrease in the fresh capital raising through IPOs. Until FY10, the majority of the funds raised through IPOs were on account of fresh issuance. However, post FY10 the figure has come down gradually.
Financial services companies dominated the primary markets, accounting for a little more than 40 per cent of total fundraising. Some of the prominent ones from this sector that listed were ICICI Prudential Life, RBL Bank and Equitas holdings. The year also saw the IPO of BSE, the country's first stock exchange to list.
The outlook for IPOs continues to look good in the near-to-medium term, however, the fresh capital raised will continue to be lower, experts said.