Fund raising in FY12 at 3-year low on PSU share deferment, volatility

However, public bonds market saw four-fold rise in issue proceeds, in contrast to equity

Fund raising through equity public issues is expected to be about Rs 23,969 crore in financial year ending March 31, almost half the amount of Rs 46,267 crore raised during the financial year 2010-11, according to Delhi-based Prime Database.

State-run firms and public sector banks accounted for 73 per cent, or Rs 17,453 crore, of the total fund raised in FY12. Of this, Rs 14,019 crore was mopped through divestments and Rs 3,434 crore through fresh capital issues. Only three state-run firms entered the market during the year — the initial public offer (IPO) of NBCC (Rs 108 crore expected), follow-on public offer (FPO) of PFC (Rs 4,578 crore) and offer for sale (OFS) of ONGC (Rs 12,767 crore).

The mobilisation in FY12 could have been higher but for the deferment of offerings from some large public sector undertakings (PSU) and the continuing volatility in the secondary market through the year, according to Prithvi Haldea, chairman and managing director of Prime Database.

“The fund raising in 2011-12 would have, in fact, been much lower but for the two offers for sale (ONGC and Wipro) done through the stock exchange auction system, which only technically would fall under the category of public issues,” Haldea said. These two offers accounted for Rs 13,517 crore of the total Rs 23,969 crore.

According to Prime Database, there were a total of 37 public issues in FY12, compared with 57 in the preceding year. This included 34 IPOs, which collectively raised Rs 5,873 crore, or 24 per cent of the total amount, compared with 52 IPOs in FY11 mobilising Rs 33,183 crore.

Excluding the two offers for sale, the average deal size fell to just Rs 299 crore in FY12 from Rs 812 crore in the year-ago period. There were only two issues of above Rs 1,000 crore, while 12 issues were of less than Rs 50 crore. The smallest issue of Rs 7.25 crore was of BCB Finance on the BSE SME Exchange.

According to Haldea, the Application Supported by Blocked Amount mode of applying for shares sold through public offerings failed to make a mark even in 2011-12. Despite being in operation for five years, only about 30 per cent of applications of retail investors came through this route.

In comparison to equity issues, the year saw much greater activity in the public bonds market, according to Prime Database. As many as 20 issues raised Rs 41,442 crore in FY12, compared with 10 issues, which raised Rs 9,431 crore last year.