Higher overseas investor flows boost share sale activity in listed firms

Over Rs 23,000 crore worth of equity stake offloaded in the last one month

The surge in overseas investor flows has boosted share sale activity by listed firms. In the last one month, equity stake sales worth nearly Rs 23,000 crore have taken place in listed companies. The jump in deal activity has come after many months of lull, providing the much-needed relief to India Inc, say investment bankers.
 
The nature of share sales includes partial or full exits by existing investors and divestment by promoters. Also, fresh fund raising activity in the form of qualified institutional placements (QIPs) is gathering pace.
 
“Market sentiment has been benign since the second half of last year but seems to have changed in the previous three weeks,” said Anuj Kapoor, head of investment banking, UBS Securities.
 
For instance, Dutch financial services firm ING Group sold its entire 3.06 per cent stake in Kotak Mahindra Bank for Rs 7,160 crore. Similarly, French banking major BNP Paribas sold its 9 per cent in SBI Life Insurance for Rs 4,751 crore while UK’s Standard Life sold nearly 5 per cent stake in HDFC Life Insurance for Rs 3,634 crore. Meanwhile, realty major DLF and private sector lender Lakshmi Vilas Bank have launched their fresh fund raising plans worth Rs 3,178 crore and Rs 421 crore, respectively.
 
All these transactions were well received by the market. Players say the market has been able to absorb a huge equity supply, thanks to the surge in foreign institutional investor (FII) flows. In the last one month, FIIs have pumped in over $6 billion (Rs 42,000 crore) into domestic equities.
 

“With renewed investor interests, blocks and QIPs are going through. In a few of the firms where blocks have happened, the promoters required some liquidity to manage borrowings. You will see more action in the listed space if liquidity conditions remain supportive,” said Jibi Jacob, head of equity capital markets, Edelweiss Financial Services.
 
Investment bankers said when such high liquidity enters the market, it is usually through large block trades and QIPs.
 
“Given the recent rally in global equities and positive sentiment in India on the electoral outcome, more QIPs, blocks and offers for sale should come to the market. People will try and take advantage of this momentum and eventually the IPO market should also take off,” said Kapoor. Besides the listed space, there have been some green shoots in the initial public offering (IPO) market as well with the maiden offering by Embassy Real Estate Investment Trust (REIT), generating good demand.
 
Bankers say conditions are conducive for the IPO market as well, adding they could soon see more deals getting launched. While the government has launched two IPOs, private sector IPOs may not come to the market in a hurry.
 
“The positive momentum in the listed deal will eventually trickle into IPOs, but it will take time,” said Jacob.
 
Industry experts say the turnaround time is higher for IPOs. “It is fairly easy to launch a share sale in a listed firm if liquidity conditions are right. However, to launch an IPO, it takes at least a few months of preparation. While the conditions are good, there aren’t too many companies waiting on the sidelines ready with their IPO plans,” said a banker.