As we complete a quarter of calendar 2014 and enter the new financial year of 2014-15, it is a good time to look at the performance of Indian initial public offerings (IPO).
An EY report on global IPOs published here says the first quarter of 2014 was the best in three years, both in terms of capital raised and the number of IPOs. A little over $44.3 billion (Rs 2.65 lakh crore) was raised globally in 239 deals between January and March, led by energy, technology and real estate.
India is conspicuous by its absence. A check on the National Stock Exchange website showed the only private sector issue that came to the book-building stage, Loha Ispaat, withdrew its IPO last week for want of subscriptions. It cut the price band from Rs 77-80 to Rs 74-77 but still did not manage to evoke interest.
Another proposed IPO, of Maiam Foods, planned for mid-February, also did not materialise. Thus, the last genuine public issue for the private sector to hit the market was the Justdial one, 10 months earlier. Compare this with the Asia-Pacific region’s performance in Q1, of 110 deals raising $18.1 bn, about 47 per cent of the global market. While Tokyo, Hong Kong and Shanghai dominated the big deals, even Indonesia (seven), Singapore, Thailand (four each) and Malaysia (one) did better than India.
Separately, Prime Database showed 2013-14 was the worst IPO year for India in 10 years, worse even than the ‘Lehman year’ of 2008-09. The number might improve if we add Offer for Sales (OFS) but these are not from new companies. There has been some activity in BSE’s small and medium enterprises platform but while the number is high at 30, the capital raised is a little less than Rs 300 crore ($50 million).
Why have Indian IPOs uncoupled from the rest of the world? The EY report does not dwell on this. Yet, two things are peculiar to India at the moment. One is regulation, where there has been a lot of flip-flops. Two, the coming general election.
In the name of protecting small investors, the Securities and Exchange Board of India first tried to introduce safety net provisions. Then, it withdrew this after criticism. Several new instruments such as OFS have helped the government to move money from one pocket to another, rather than help genuine capital raising and value creation. It is time for Sebi to think of some genuine process improvements and IPO-friendly measures that can bring back companies.
Second, the companies themselves and their private equity backers might waiting, in anticipation of a favourable political environment after the elections which might drive the markets to new heights. This could mean far better valuations than one can expect now.
Conscious uncoupling (thanks to Gwyneth Paltrow ) is not the only new phrase I learnt this week. Incidentally, my second learning of the week also came from Hollywood. Andrew Garfield, star of The Amazing Spider-Man, won more hearts here by saying ‘Steady...lah’ than by jumping around in red and blue at the much-hyped Earth Hour on Saturday. My guess is it’s Singlish for ‘cool.’ Online dictionaries say it can be used either as a compliment or an exhortation to calm down. Whatever it is, don’t worry, just Steady...lah!