Average IPO size hits highest since 2010, at Rs 1,030 crore: Refinitiv

Paytm has pushed up numbers with its record fund-raising

One 97 Communications, the parent of Paytm, may have made a sorry debut on the bourses; but it has significantly raised the average for money raised through the stock market this year.

The average company had raised an average of $138 million (or Rs 1029.8 crore) by selling shares to the public on the stock market, shows an analysis of data from tracker Refinitiv, a London Stock Exchange Group business. The analysis looked at funds raised as of the end of the week in which Paytm's IPO closed, 12th November. Data for past years is also as of the same date. Initial public offers (IPOs) had last seen a similar average amount raised in 2010. Incidentally, this was also the year in which Coal India raised a record over Rs.15,000 crore through its IPO. There had been 56 IPOs that year. This year it is 93 (see chart 1).

The number of companies coming to the market has been in more recent years. There were higher numbers in 2017 and 2018. This points to the possibility that aside from a few companies which have raised large amounts, many have not been hitting the market for funding despite booming valuations. One way of looking at this would be to look at funds raised as a proportion of the total market capitalisation of companies already listed. The highest this hit was in 2004. Companies raised the equivalent of 8.2 rupees for every Rs.1000 in total market capitalisation at the time. These were the initial days of the bull market that ended in 2008 with the global financial crisis.

The funds raised so far is the equivalent of Rs 3.5 for a Rs 1000 worth of existing market capitalisation. This is higher than 2018-2020.

A key reason for companies not hitting the market may be the demand situation. Companies were only utilising 60 per cent of their existing manufacturing capacity in the first quarter of the current financial year. The Reserve Bank of India’s Order Books, Inventories and Capacity Utilisation Survey (OBICUS) survey with this data is released with a lag. Companies have limited reason to raise fresh equity capital for expansion when existing facilities aren’t being fully utilised. This extends beyond equity markets. Industry share of bank credit was at a record low of 26 per cent as of August.  A lot of IPOs involve substantial sale of shares by existing shareholders, sometimes more than fund-raising for the company.

Existing Paytm shareholders netted Rs.10,000 crore by selling shares, while the company got around Rs.8,300 crore for its future plans. The stock ended down 20 per cent on debut.