Mumbai: Indian firms are tapping London’s Alternative Investment Market, or AIM, to raise funds as the domestic market for initial public offerings, or IPOs, has dried up for lack of investor appetite for new stock sales and dipping valuations of listed companies.
Since mid-May, five Indian companies have listed shares on AIM.
They are security and facilities management firm Mortice Ltd, OPG Power Ventures Plc., Indus Gas Ltd, KSK Emerging India Energy Fund Ltd and CBaySystems Holdings Ltd.
Cautious steps: A trader at Multi Commodity Exchange of India. The firm was one of the 22 companies that had collectively planned to raise about Rs16,500 crore but allowed their IPO approvals to lapse. (Photo: Amit Bhargava / Bloomberg)
“A further five listings seem imminent in the coming months,” said Mahad Narayanamoni, partner at Grant Thornton India, an arm of the global consulting firm that advises Indian clients on AIM listings.
As many as 25 Indian companies now trade on AIM with a combined market capitalisation of about £3.8 billion (Rs30,900 crore).
Power producer KSK, which listed on 9 June, was the biggest Indian public offering on AIM this year, raising £101 million. Mortice, which listed on 15 May, raised £5.01 million, while OPG Power listed on 30 May after raising £65.05 million.
Indus Gas, which started trading publicly on 6 June, raised £25 million. CBaySystems, which listed on the same day, did not raise new cash but was readmitted after its acquisition of a 69.5% stake in MedQuist Inc., according to a Grant Thornton report.
Back home in India, the primary markets have largely been in slumber since February. Between February and August, only 25 small IPOs have hit the market raising Rs4,345 crore as against 65 new share sales raising about Rs33,000 crore in the same period last year.
Overall, 37 IPOs have raised Rs19,000 crore from the market this year against 105 IPOs and Rs39,387.72 crore worth of public money raised last year. Few IPOs have offered returns to the investors this year as the Sensex, the Bombay Stock Exchange’s benchmark index, declined about 30% since January as rising inflation and interest rates scared away investors.
“In good times, the last hurdle is the approval of the capital market regulator and a company would typically hit the market as soon as it receives the nod,” said Prithvi Haldea, an expert on primary markets and managing director of New Delhi-based Prime Database Praxis Consulting and Information Services Pvt. Ltd.
According to him, 22 companies that collectively planned to raise about Rs16,500 crore have allowed their IPO approvals to lapse in recent months.
This includes large issues by companies such as Reliance Infratel Ltd, UTI Asset Management Co. Ltd, Jaiprakash Ventures Ltd and Multi Commodity Exchange of India Ltd, or MCX.
According to Haldea, a dozen other companies, which have regulatory approval for share sales, may scrap their fund raising plans. The collective worth of the proposed IPOs of these companies is about Rs3,600 crore.
Since the beginning of this year, eight firms—planning to raise about Rs4,772 crore—have withdrawn offer documents filed with the Securities and Exchange Board of India, or Sebi. This group includes JSW Energy Ltd.
At least 74 companies, which were to raise Rs43,129 crore this year, are awaiting market sentiment to turn around before they tap investors.
Another 32 companies, which are planning to raise Rs18,000 crore from the market, have filed with Sebi and are awaiting approval.
“Surely, most of them would be hoping that the approval does not come in early,” said Haldea.
The list of this 32 companies yet to get Sebi approval includes some large firms such as Adani Power Ltd, Future Venture Ltd, Bharat Oman Refineries Ltd and NHPC Ltd.