Market weakness is coming in the way of companies getting listed on the exchanges. The data sourced from Prime Database shows 13 companies have filed for initial public offering (IPO) in the current calendar year, and that is 45 per cent lower than in the corresponding period last year.
In the first nine months of last year (i.e. till September 30), 24 draft prospectuses (DRHPs) were filed. Compared to last year’s tally of 31, the number of filings is 58 per cent lower. Investment bankers say filings are likely to remain on the lower side unless policy decisions give a fresh impetus to the markets.
“The tax cuts by themselves may not lead to a structural turnaround. We need measures that can spur demand and get consumption moving, which in turn will make market conditions more conducive,” said Rajendra Naik, managing director, Centrum Capital.
“Typically, observations from the Securities and Exchange Board of India (Sebi) are received within two-three months of filing a DRHP. After that, companies have a year to complete their IPO. Unless they see a clear window, companies don’t want to file, and just watch their approvals getting lapsed,” Naik added.
Experts say companies may show an interest after the strong response the IPO of the IRCTC received. The Rs 640-crore issue was subscribed 112 times. “Some promoters may start checking with merchant bankers whether they can go ahead with their IPO plans,” said Pranjal Srivastava, independent capital market professional.
Another banker said: “The major hurdle is that promoters and other existing investors have certain valuation multiples in their minds, which is difficult to fetch in the current environment.”
Market sentiment received a blow on Friday after the Reserve Bank of India revised its growth forecast from 6.9 per cent to 6.1 per cent.
The benchmark indices cracked over 1 per cent, closing 730 points lower than the day’s highest point.
The markets have become nervous owing to concerns among banks over stressed exposures, combined with sluggish consumer demand as reflected in the slowdown in the auto segment and other sectors.
Bankers say “we could still see some quality IPOs hitting the markets”, but the volumes will only start to pick up once all the issues get addressed and there is a sustainable shift in investor sentiment.
On the global front too, the situation has been bleak. A recent study by EY India pointed out how fresh equity issuances have petered down in global markets. In the September quarter, 256 IPOs came to the markets globally, with total proceeds of $40.2 billion. This was 24 per cent lower in volume terms and 22 per cent lower in value terms, compared to corresponding period last year.