India Inc’s fund-raising activity, especially through the equities route, plunged during the 2011-12 financial year, due to weak secondary market conditions. Equity fund mobilisation from the primary market, which includes initial public offerings (IPOs) and follow-on public offerings (FPO), saw an 80 per cent drop to Rs 9,683 crore, from Rs 48,654 crore last year.
During 2011-12, only Rs 5,043 crore was raised through 30 IPOs, the lowest since 2008-09, according to the Survey. The last financial year saw 53 IPOs, cumulatively raising Rs 35,559 crore. Although all the figures for the current financial year are only up to December 31, the picture hasn’t changed much since then.
The average IPO size during the current financial year dropped to Rs 168 crore, compared to Rs 671 crore in 2010-11, indicating poor appetite for large-sized share sales. During 2011-12, only one IPO, of L&T Financial Holdings, raised more than Rs 1,000 crore. This was in a stark contrast with the previous year, which had seven offerings, including the biggest-ever — Rs 15,000 crore — of Coal India. Also, the government is set to miss the Rs 40,000 crore disinvestment target by a huge margin.
|RESOURCE MOBILISATION VIA THE PRIMARY MARKET|
|Equity via IPOs||2,082||24,696||35,559||5,043|
|Number of IPOs||21||39||53||30|
|c. Private placement||173,281||212,635||218,785||188,530|
|Source: Sebi and RBI; Note: Equity issue consists of only public issue;
# as on Dec 31, 2011
According to experts, the fund-raising activity took a hit due to sharp decline in the secondary market, which saw valuations of stocks across sectors coming down. “The current financial year was a very dismal one for IPOs. Low valuations made promoters wary, while falling markets made investors wary,” said a top official with a leading foreign investment bank.
The key benchmark indices, the BSE Sensex and the NSE Nifty, declined 20.4 per cent between April and December 2011.
“If the secondary market is weak, the participation of investors in IPOs gets impacted,” said B Madhuprasad, vice chairman, Keynote Corporate Services. He said poor post-listing performance of IPO companies and a crackdown by the market regulator on firms for violating norms also hurt investor sentiment.
Capital raising by way of private placement of corporate debt also declined in 2011-12. The Survey says the amount raised through private placement in the corporate debt market was Rs 1,88,530 crore (up to December 2011) as compared to Rs 2,18,785 crore in the previous financial year. Further, only Rs 4,791 crore was mobilised through debt issues, as compared to Rs 9,451 crore in 2010-11.