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Choppy markets choke IPOs worth Rs 30,000 cr

Mehul Shah & K Raghavendra Kamath  |  Mumbai 

India Inc’s plans to raise over Rs 30,000 crore from initial share sales this year have been put on the back burner as investors’ appetite remains low and promoters are unwilling to sell at lower valuations.

Several private sector companies that had got a nod for initial public offers (IPOs) from the Securities and Exchange Board of India (Sebi) have allowed the one-year window to lapse. They have not re-filed the draft red herring prospectus (DRHP) with the regulator.

The list includes Jindal Power, Reliance Infratel, Sterlite Energy, Lodha Developers and BPTP.

Navin Jindal-promoted Jindal Power wanted to raise over Rs 7,000 crore from an IPO in 2011. However, the unit of Jindal Steel and Power let Sebi approval lapse on May 27. It has not re-filed the DRHP. “We haven’t decided anything yet,” said a Jindal Steel and Power spokesperson.

Mumbai-based Lodha Developers has also not filed a fresh DRHP. Its approval lapsed in January. “We haven’t taken any decision on this,” said Abhisheck Lodha, managing director, Lodha Developers.

The company wanted to raise Rs 2,500 crore for its projects and pre-payment/repayment of loans taken by its subsidiaries. On how the company was meeting its requirements, Lodha said: “We have plenty of internal cash flow. We are making over Rs 200 crore monthly surplus post operations.”

Like Lodha, most property developers have either dropped their IPO plans or do not plan to come out with an IPO in the near future.

New Delhi-based property developer BPTP, which was planning to come out with a Rs 1,500-crore IPO this year, let Sebi approval expire in May. It has not re-filed the DRHP. “We can’t bring an IPO in the current market conditions. We have dropped our plans for the time being,” a BPTP executive said on condition of anonymity. The executive claimed that since the entire IPO proceeds were for future growth, the company was managing through pre-selling projects.

BPTP recorded sales of Rs 1,300 crore in 2010-11. In the present financial year, it had registered sales of Rs 400 crore, said the executive. “Since our sales are good, most banks are giving us loans. We are managing with internal accruals and construction debt,” he said.

Pune-based Kumar Urban Development and Mumbai-based Neptune Developers have also deferred their IPO plans. “Market conditions are not conducive. We do not plan to re-file the DRHP in the near future. Let the improve and then we will look at it,” said Lalit Kumar Jain, chairman and managing director, Kumar Urban Development, which was planning to come out with an IPO of Rs 320 crore. Its approval expired in March this year.

Nayan Bheda, chairman and managing director of Mumbai-based Neptune Developers, said his company had ‘’postponed the IPO” due to market conditions. Neptune was planning to raise Rs 370 crore. Then there are companies such as Avantha Power & Infrastructure, Raheja Universal and Virgo Engineers whose approval is expiring in two months and there is no sign that they will hit the market before that.

“Because of the uncertainties in the market, not many companies are going ahead with IPOs,” said Naresh Kothari, president and head – equity capital market, Edelweiss Capital. “However, there is a demand for good companies at right valuations,” he added. Due to rising interest rates, the attraction of equities has diminished as investors are opting for fixed-income securities. The BSE Sensex has fallen nearly 8 per cent this year so far, making India one of the worst performing in the world.

First Published: Tue, July 26 2011. 00:43 IST