Firms put IPO plans on hold amid market churn
The IPO market may be lacklustre until end of 2018. If secondary market stabilizes, a few issuances are likely in early 2019, say analysts
Mumbai: More than 40 Indian companies have approvals for initial public offerings (IPOs) totaling more than ₹50,000 crore, but most are not in a hurry as secondary market sentiments are roiled with deteriorating macroeconomic scenario and global disturbances.
About 30 more have filed draft red herring prospectus with the Securities and Exchange Board of India (Sebi), and are waiting for the markets regulator’s approval, according to a Mint analysis.
“The overall sentiment for primary fund-raise has turned negative. We are advising issuers to hold on for now and wait for the next window of opportunities,” said Debasis Panigrahi, executive director at Nomura’s India investment banking unit. He expects primary market activity to resume “once the market volatility subsides and the market sentiments become conducive for fund-raising again”.
Boiling crude oil prices and a currency that keeps testing new lows each day are hurting India’s fiscal balances. The rupee has weakened more than 13% so far this year, testing a new low of 74.48 against the dollar last week. Brent crude has climbed 21.47% in the same period and is currently at $81.23 per barrel, up 0.99% from Friday’s close. Meanwhile, the benchmark Sensex fell 3.76%, or 1,362.04 points, in October so far.
“Several IPOs were looking to hit the market around this time before the state elections. However, I don’t foresee anything in the near future, given the volatility in the market, as also seen in the case of a few of the recent IPOs which hit the market,” said Pranav Haldea, managing director of IPO-market tracker Prime Database.
“Primary markets are a function of the secondary markets. If the volatility continues, most of them won’t hit the market,” pointed out Haldea. “The IPO market could be lacklustre until the end of the year. If secondary market stabilizes, we could see a few issuances in the first couple of months of 2019,” added Haldea.
Last year, the IPO market witnessed an all-time record fundraising of ₹67,147.4 crore with 36 companies hitting the market, according to Prime Database data.
So far in 2018, a total of 24 companies raised ₹30,959.07 crore through IPOs. Bulk of the activity was however seen in the January to March quarter, which saw 14 companies raise ₹18,591.7 crore, the data showed.
“Secondary market volatility is a big deterrent. We may not see many issuances for now,” said Pranjal Srivastava, an independent capital market adviser. “We can’t put a definite timeline as yet. It’s a very dynamic situation. The state elections are also coming up, that could also be a hurdle. The realistic assessment may be after general elections, but it’s very difficult to say right now,” he said.
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