Funds raised via IPOs in 2014 set to be lowest in over a decade

The Rs 1,201 crore raised collectively by five companies in 2014 is the lowest since 13 companies' Rs 296 crore via IPOs in 2001

The amount raised in calendar year 2014 (CY14) through the Initial Public Offering (IPO) route is set to be the lowest in the past decade, despite the benchmark indices hitting new highs during the year.

Five companies collectively raised Rs 1,201 crore in 2014, the lowest since 2001, when 13 companies had mobilised Rs 296 crore via the IPO route. In CY13, three companies had raised Rs 1,284 crore through public offers, according to PRIME Database.

Thus far in 2014, five IPOs – Wonderla Holidays, Snowman Logistics, Sharda Cropchem, Shemaroo Entertainment and Monte Carlo Fashions – have tapped the primary market. NCML Industries plans to hit the capital markets with an offer for sale of six million equity shares. The price band has been fixed at Rs 100-120 per equity share of Rs 10 each.

“It takes anywhere between four and six months for a company to complete the IPO process. Given that the markets have rallied after the formation of a stable government at the Centre in May, there are chances that companies will now gear up for tapping the IPO market. Hence, there could be a lag effect which is visible in CY15,” said G Chokkalingam, founder and managing director, Equinomics Research and Advisory. According to PRIME Database, six companies got the Securities and Exchange Board of India’s (Sebi) nod to mobilise Rs 2,605 crore via IPO and follow-on-offers in 2014. Ten other companies have filed offere documents to raise Rs 4,047 crore. However, all these are yet to launch their offerings.

Despite a stable government at the Centre, a buoyant secondary market has failed to have a rub-off effect on primary markets. In the past six months (July-December), four companies have collectively raised Rs 1,020 crore, compared to 18 firms that mobilised Rs 19,242 crore in the second half of CY09 and 12 companies that raised Rs 11,313 crore via IPOs in CY04. In both years, the emergence of a stable government at the Centre saw a rally in the secondary market.

“Issuers have not taken the primary market route for two reasons: One, in the secondary market, it was in the second half of CY14 that one saw a sustained rally, especially the mid-caps: Two, in many cases in the primary market, issuers also got an advantage of getting money from via the private equity (PE) route. The reason why PE investors invested was largely because the valuation at which the companies were offered for investment was quite attractive,” said Deven Choksey, managing director and chief executive officer, K R Choksey Shares and Securities:

“Going ahead in 2015, I don’t think there will be much change in this trend. Companies that have completed three-four years of funding from PE investors, say Flipkart, may want to list in 2015. We have already seen such a move with Just Dial,” he added.