PE firms mopped up $17.2 bn through IPOs in Apr-Jun

PE firms mopped up $17.2 bn through IPOs in Apr-Jun

New Delhi: Private equity backed companies mopped up a whopping $17.2 billion through initial public offers (IPOs) globally during April-June, 2011, with firms in Indian and China together accounting $2.7 billion of the total capital raised, says a report.

According to a report by Ernst & Young, 45 PE-backed companies raised $17.2 billion in proceeds, highest quarterly total since the second quarter of 2007.

This quarter figures is nearly twice the volume of January-March period of 2011 and up 24% on a value basis.

So far this year, PE-backed firms raked in $31.1 billion in 68 separate IPOs, the report said adding that it will exceed the $58.3 billion mark which was raised at the market-peak in 2007.

“Despite ongoing uncertainties in the markets, momentum is clearly continuing to build across the IPO markets. This is giving PE sponsors an ever-widening window to exit holdings as investors move further out of the risk spectrum in search of companies with strong growth stories," Ernst & Young Global Private Equity leader Jeffrey Bunder said.

Companies based in China and India garnered $2.7 billion across nine deals in the second quarter, as compared to the $1.5 billion raised in six deals in the previous quarter.

Further, companies based in the emerging markets also continued to see elevated activity as they raised $7.7 billion across 17 separate deals.

“Emerging markets exchanges are becoming increasingly amenable to sponsored IPOs as investors become more comfortable with the PE model. Additionally, the growing availability of cross-border listings is providing emerging markets -based companies with a wider range of opportunities than in past cycles, " Bunder added.

In Asia, IPO activity on Asian exchanges grew from six deals valued at $1.3 billion in first quarter to 12 deals valued at $3.2 billion in the second quarter.

Despite the increase however, issuance came under pressure midway through the quarter as investors dealt with growing concerns about the effects of looming inflationary pressures on the region’s economy, leading many companies in Asia-Pacific to postpone or cancel their offerings. China in particular saw 28 deals postponed or withdrawn in Q2.

“While market sentiment could slow the pace of new issuance out of China, the overall pipeline remains healthy," the report noted.

In addition, activity in Europe rebounded in the quarter, increasing to eight PE-backed offerings from just one in Q1. Proceeds jumped from $104.7 million in the previous quarter to nearly $2.6 billion in April-June period of 2011.

Looking ahead, the report said that PE-backed firms are on track to exceed the funds raised in the 2007 market peak.

However, Bunder said, “investor worries about the renewed debt crisis in Greece and widespread concerns about the pace of the global economic recovery sent global equities indices lower and challenged post-IPO performance in the second half of the quarter".