In last two months, approvals for IPOs worth Rs 2,500 cr lapsed

Disagreement on valuations, poor financial performance, uncertainty in market are possible reasons

Despite a string of equity initial public offerings (IPO) in the past year, a clutch of companies has failed to hit the market with their offers, letting their regulatory approvals lapse.
 
In the past two months, as many as 17 firms that collectively planned to mop up Rs 2,500 crore saw their approvals lapse. Disagreement on valuations, poor financial performance, and uncertainty in market are possible reasons these firms did not hit the market.
 
"When you do see so many companies let their IPOs lapse, it shows selective investor interest and valuations not being in line with promoter expectations," said Pranav Haldea, managing director, Prime Database.

Some companies that let their approvals lapse include payment solutions provider AGS Transact Technologies, agribusiness firm Nuziveedu Seeds, Paranjape Schemes Constructions, telecom solutions provider Matrix Cellular, and GVR Infra.
 
About 27 companies garnered Rs 26,000 crore through IPOs in 2016. Despite buoyancy in the IPO market, investors have become wary. "Besides the financial numbers, investors are looking at the company's governance track record, as well as prospects of the sector before taking an investment call," said Haldea.
 
A company gets one year to hit the primary market after regulatory clearance. After one year, it needs to refile for approval.
 

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A poor set of financial numbers may have been a factor in postponing offerings. "Companies typically tap the market when they have churned out a good set of numbers and may choose not to come if the performance in one or more quarters has not been encouraging," said G Chokkalingam, founder, Equinomics Research and Advisory.
 
Demonetisation and resultant volatility in the market may have also played spoilsport. "Consumer-facing companies and those dependent on cash transactions would have got impacted," said Chokkalingam. In the two months from November 8, the benchmark BSE Sensex slid three per cent.
 
The IPO pipeline looks robust. A positive response to BSE's initial public offering (IPO) has instilled confidence into the primary market, which has seen a two-month lull period.
 
Investment bankers say at least half a dozen companies could launch their public offers immediately after the Budget. Security and Intelligence Services,
 
D-Mart hypermarket chain operator Avenue Supermarts, GR Infraprojects, and Shankara Building are some.