IPO fund raising at 6-year high in FY17, trend expected to continue

Capital mobilisation through the Initial Public Offer (IPO) route hit a six-year high in 2016-17. A total of 25 companies collectively raised Rs 28,220 crore, the highest since 2010-2011.

A supportive secondary market and encouraging performance after the stock listed had kept investor sentiment buoyant towards the primary market. Investment bankers say the next financial year (starting April 1) could be even better, with big-ticket offerings like the National Stock Exchange, IPOs of state-owned General Insurance Co and of other public sector undertakings (PSUs) such as Cochin Shipyard.

"Overall sentiment looks good, both on the primary markets side and the investors' side. Given the strong IPO pipeline, next year could also be good for primary markets," said Girish Nadkarni, managing director at Motilal Oswal Investment.

This financial year saw some big issuances, such as of ICICI Prudential Life, PNB Housing Finance and D-Mart. Many also registered stellar gains on the listing day. The most recent instance was of the 100-plus per cent rise in the shares of D-Mart.

"FY17 was a positive year for IPOs. We saw some good quality companies, with strong financials and efficient business models, hit the markets. This is one reason why a majority of the newly listed companies gave good returns. This trend is likely to continue in the near to medium term, as we have some good companies lined up for IPOs," said Subhrajit Roy, executive director, Kotak Investment Banking.

Financial services companies dominated the primary markets, accounting for a little more than 40 per cent of total fund raising. Some of the prominent ones from this sector that listed were ICICI Pru, RBL Bank and Equitas holdings. The year also saw the IPO of BSE, the country's first stock exchange to list.

Despite high volatility, a rally in the secondary markets helped the IPO one. The BSE's benchmark Sensex has gained around 15 per cent since April 1, 2016. More important, the BSE IPO, a gauge for the performance of newly listed stocks, gained 36 per cent during the year.

The shares of RBL Bank, Quess Corporation and Ujjivan Financial Services have doubled since listing.