The Rs 1,665-crore Initial Public Offer (IPO) of Samvardhana Motherson Finance, the largest since October 2010, had to be withdrawn due to poor investor response, amid weak secondary market conditions.
The IPO got less than a quarter of the issue size, despite raising a little over Rs 200 crore from anchor investors.
After Goodwill Hospital, Samvardhana is the second company to withdraw its IPO this calendar year. Last week, the IPO of jewellery retailer Tribhovandas Bhimji Zaveri had barely managed to scrape through.
Market experts said the lukewarm response to these recent issues is a big setback for companies wanting to enter the capital markets in the near future. “The poor response is a big concern. The secondary market is not doing well; this is showing in the primary market,” said Jagannadham Thunuguntla, chief strategist at SMC Global Securities.
“The primary market will revive, when there is stability or buoyancy in the secondary market. Investors will be wary investing in new companies, as most listed stocks are not performing well,” said Prithvi Haldea, chairman and managing director, Prime Database.
The key benchmark indices, the Sensex (Bombay Stock Exchange) and Nifty (National Stock Exchange), are down by close to nine per cent from their February highs.
A Samvardhana statement said: “In light of the weak equity market conditions and volatile currency movements, the company, on the advice of the lead managers, has decided to defer its proposed IPO.”
Standard Chartered Securities and JPMorgan were the lead managers.
Thunuguntla said a little over 80 companies with valid approvals from the Securities and Exchnage Board of India were holding back their IPOs plans due to the poor market conditions. Fund raising through IPOs is down nearly 70 per cent year-on-year for the first four months of this calendar year.
So far in 2012, only six IPOs have been successful, raising a total of Rs 923 crore from the domestic market. During the same period last year, about 12 IPOs had raised a cumulative Rs 2,849 crore.