New Delhi: Having tried unsuccessfully in 2008, over three dozen firms are holding back IPO plans to raise an estimated Rs75,000 crore (over $15 billion) for the right market conditions, which experts believe is unlikely before the year-end.
The overall size of the IPO backlog from 2008 is incidentally more than four times of the total amount raised during the year through this route and almost equals the cumulative capital raised over the past three years.
The slackening in the primary market was primarily due to the poor response to the post-IPO listings in the secondary market and the slump in the investors’ sentiments due to overall sluggish market conditions, the experts said.
The weakness in the market led to deferment of IPO plans by close to 40 companies, who were collectively seeking to raise about Rs75,000 crore.
News on your mobile, log on to m.livemint.com
“As far as the overall IPO market is concerned I would think market would really revive only after we see correction...I would expect that the earlier signs of market being ready to accept the IPOs would be the very late part of 2009,” the country’s top private sector lender ICICI Bank CEO and MD K. V. Kamath said.
Overall, the experts believe that 2009 could be another bad year for IPOs and any recovery was only expected by the fag end of the year when some of the backlogs from the previous year could hit the market.
While some of the companies might explore alternate routes for raising funds, such as private equity placement, most of them are unlikely to return to the IPO street before the second half of the year, the market observers believe.
Brokerage firm Bonanza Portfolio’ president research P. K. Aggarwal said that the revival of IPO scene in 2009 seem to be a remote possibility.
“I believe the primary market may rebound by 2010 or even 2011 and this year the scene may remain dormant,” Aggarwal added.
During 2008, the primary market saw total mobilisation of Rs16,927 crore through both initial and follow-on public offers (IPO and FPOs), wherein the IPO of Anil Ambani group’s Reliance Power biggest in the history of corporate India so far -- alone contributed more than Rs11,500 crore.
The total funds raised during 2008 represented more than 60 per cent fall from over Rs45,000 crore raised through IPOs and FPOs during 2007 and also lower than about Rs24,000 crore in 2006.
According to primary market tracking firm Prime, as many as 37 companies which were planning to mop up about Rs29,164 crore through IPOs had deferred their plans to enter the market in 2008 because of adverse market conditions.
This included some big names like Anil Ambani group’s Reliance Infratel (Rs6,000 crore), Adani Power (Rs5,630 crore), Jaiprakash Power Ventures (Rs4,000 crore) and Kishore Biyani-led Future Ventures (Rs2,660 crore).
Besides, there were talks of a mega 10-billion dollar (Rs40,000 crore) IPO from state-run Bharat Sanchar Nigam Ltd (BSNL).
According to the US-based research and investment management services firm Renaissance Capital, the global IPO activity is likely to be low in 2009, but new issues could produce healthy returns.
According to its outlook for IPOs in 2009, historical precedents suggest that IPOs in periods of low issuance can generate very strong returns as companies are forced to become more realistic with their proposed valuations in order to successfully raise capital, thereby creating opportunities for investors.
Anticipating some good developments on the IPO front in India through the government’s privatisation moves, Renaissance Capital said: “The Indian government has expressed interest in divesting ownership stakes in several public sector undertakings, including Oil India and hydroelectric power utility NHPC (which together are looking to raise over $700 million).
“A $10-billion IPO of India-owned telecom BSNL that was delayed in 2008 may also resurface.”