Indian companies have raised a record amount of nearly Rs 57,000 crore through initial public offerings so far this year, but more than Rs 45,000 crore have gone to promoters and other existing shareholders leaving only 20 per cent funds for the firms' growth and expansion plans.
Out of the total IPO funds raised by 31 companies so far in 2017, nearly 80 per cent (Rs 45,755 crore) has gone to existing shareholders. This has left Rs 11,115 crore for the companies in the form of fresh capital, according to an analysis of the IPO data available with stock exchanges.
The funds that have gone to promoters and other existing investors like private equity players are for the shares sold by them for partial or full exit from the firms.
A total of 31 companies have raked in Rs 56,870 crore through the IPO route so far this year. Indian equity market appears headed for a record haul in 2017 in terms of money raised through IPOs, as a number of big-ticket offers are already lined up for the coming weeks.
So far, the highest amount of funds through IPOs in a full calendar year was raised in 2010 at Rs 37,535 crore -- a level which has already been exceeded by a big margin in 2017.
The buoyancy in the primary market is likely to continue till equity markets are flushed with liquidity, experts said.
"Many IPOs being offer-for-sale (OFS) reflect the fact that in 2010-14 when the public capital markets were in a downturn, growth capital came from private equity," IDFC Bank Managing Director (MD) Venkatraghvan S said.
"It doesn't make sense to raise money if you have no clear objects. The next best thing is to list so that when required, at the appropriate time, funds can be raised through qualified institutional placement (QIP), preferential allotment etc," he added.
Echoing the view, Axis Capital MD and Co-Head Investment Banking Salil Pitale said: "Fresh capital is raised only if really required for growth, rather than for high risk purposes or to meet regulatory dilution requirements".
The trend of predominance of OFS to continue -- both from private equity investors and select divestments by sponsors including government, he added.
Interestingly, over Rs 35,000 crore has been raised by insurance firms, ICICI Securities MD and CEO Shilpa Kumar said this could be attributed to insurance regulator Irdai's move to relax capital raising norms for insurers.
The IPO chart in the year is led by General Insurance Corporation of India (GIC) that garnered over Rs 11,372 crore. This was the largest public float by firm after the October 2010 offer by Coal India which had garnered Rs 15,000 crore.
Although only Rs 1,570 crore would go to the company while Rs 9,804 crore would go to the government.
GIC was followed by New India Assurance Company, which mopped-up Rs 9,600 crore. Of this, Rs 1,920 crore would go to the firm and the remaining Rs 7,680 crore to the government.
SBI Life Insurance and ICICI Lombard General Insurance raised Rs 8,400 crore and Rs 5,700 crore via their respective IPOs and all the fund has gone to their existing shareholders.
Going ahead, IPO markets will continue to see hectic activities as a dozen firms are awaiting Sebi's nod to launch their public issues. Besides, higher valuation of secondary market would attract investors towards IPOs.