Market roundup | IPOs hit six-year high in 20161 min read . Updated: 03 Jan 2017, 12:13 AM IST
In other news, non-back resources are set to dominate corporate funding in 2017 and truckers may gain from lower freight rates
IPOs in 2016 highest since 2010
Initial public offerings (IPOs) raised $4 billion in 2016, an 85% increase from last year. According to Thomson Reuters, this is the highest annual Indian IPO proceeds since 2010 ($8.5 billion). ICICI Prudential Life Insurance Co. Ltd raised $908.1 million in proceeds and was the largest ECM (equity capital markets) issuance from India since Coal India Ltd’s $3.5 billion IPO in 2010. Follow-on offerings in 2016 totalled $5.4 billion in proceeds, 67.2% lower than last year. Overall, “equity and equity-linked issuance by Indian companies raised a total of $9.7 billion in 2016, a 47.9% decline in proceeds after witnessing a strong annual period in 2015", said Thomson Reuters.
Indian companies look to non-bank funding sources
The aggregate fund flow to Indian companies shrank in the first eight months of 2016-17 compared with the corresponding period in the previous fiscal year, data from the Reserve Bank of India (RBI) showed. In the latest financial stability report, RBI said that companies took recourse to non-bank sources of funds as banks became risk-averse in the wake of their burgeoning bad loan stockpile. The central bank expects banks to remain risk-averse in the coming quarters as well given that bad loans have not come down. Initial data also suggests that demonetization has reduced the demand for bank credit with loan growth crashing to below 6% as of 9 December. Non-bank resources will dominate corporate funding in 2017 as well with corporate bond issuances surging further.
Low freight rates may help truckers regain share
Helped by gains in container volumes, Indian Railways’ freight traffic registered good growth in November. Freight volumes grew 5.5% year-on-year after five consecutive months of declines. But the recent cash crunch and the resultant pressure on export-import volumes in the near term can undermine the container train operators’ (CTOs’) market share, Nomura Research said in a note. According to Nomura, CTOs recently gained market share thanks to the rollback of port congestion surcharge and sustained efforts by the railways. But these market share gains can erode due to the cash crunch-induced slowdown in exports in the near term and relatively low freight rates on the roadways. “The lower relative freight rates will cause the incremental freight share to return to roads," said Nomura.