Expect equity fund raising to top Rs 1 lakh crore in FY16: S Subramanian

Interview with MD & head of investment banking of Axis Capital

The primary market is in very good shape, says S Subramanian, managing director and head of investment banking of Axis Capital. In an interview with Sneha Padiyath and Samie Modak, Subramanian says domestic companies would do well to list in the home market. Edited excerpts:

Why is the primary market going through a lull, despite a strong rally in the secondary market?

I believe the primary market has been in very good shape. There have been a lot of qualified institutional placements (QIPs) and large government offer-for-sales (OFS). If you look at the overall primary market, not just initial public offerings (IPOs), it has been very active. Axis Capital alone has been involved in fund raising of more than Rs 20,000 crore.

Why hasn't the IPO market benefited?

The previous downturn lasted a long time. As companies weren't sure when the situation would change, many didn't even get their offer documents ready. If you look at April last year, the filing of offer documents with the Securities and Exchange Board of India (Sebi) was the lowest in about a decade. Unlike listed firms, companies that come to the market for the first time require a lot of hand-holding. The documentation process takes a lot time.

How much fund-raising do you expect in FY16?

The pipeline is very good. I would be surprised if the fund-raising isn't more than Rs 1 lakh-crore in 2015-16. These include fund raising through IPOs, OFS and QIPs. The Rs 70,000-crore disinvestment target set by the government will be over and above this.

Will companies from a particular sector dominate the IPO market?

We have mandates from companies in every sector - infrastructure, consumer and pharmaceuticals.

Now that regulations allow companies to list abroad, do you think companies should explore foreign listing opportunities?

The Indian market is the best for domestic companies. There might be cases in which the foreign market might provide a better reception but those would be exceptions, not the rule. I think a lot of Indian companies could fetch better value by listing domestically. Consider companies such as Infoedge or Just Dial; Naukri.com (Infoedge) has better valuations than Monster.com.

What is your take on Sebi's move to allow start-up IPOs to list separately?

All that Sebi is saying is if you don't want to go through the normal listing process for an IPO, don't raise money from small investors. The regulator is right in its approach. It has to take care of retail investors. If companies want to tap retail money, they should give more information. Sebi recognises the ideal place for a company to list is the local market. It is proactively trying to ensure there is a platform available domestically.

Do you think investors have become more cautious towards IPOs?

Investors are willing to support deals that are priced well. However, pricing is only a part; investors need to be told about the story.

How can retail investors return to the IPO market?

My experience with retail is very simple - retail wants to invest in a good company or a story good. As investment bankers, it is our job to ensure investors get to know about the company. Investors, whether retail or institutional, have only one objective - they want a transaction through which they can make money. Yes, we understand there are risks and is there enough money to be made against that risk. It is the job of the banker and the company to convince investors about the investment opportunity and assure them adequate returns.