Even as calendar year 2015 may have been the best in five years for initial share sale, a large portion of fund-raising was towards giving an exit to existing shareholders or repaying debt, and very little quantum was used as growth capital or business expansion.
Of the total R13,145 crore that Indian companies have raised through initial public offerings (IPOs) so far in 2015, nearly R6,700 crore was raised by promoters and private equity (PE) players through market sale, stock exchange data showed. An additional 20-25% of the quantum is towards repayment of debt.
“There was no traction in primary markets in the last two to three years and PE firms have got a chance to exit the companies after a long time. Further, in some smaller issues, promoters had deliberately sold a part to make the issue bigger,” said Prithvi Haldea, chairman of Prime Database.
Sebi tweaked IPO rules last year, whereby companies with after IPO market capitalisation of less than R 4,000 crore are required to either dilute 25% or R400 crore of the issue, whichever lower.
Companies with post IPO market capitalisation of more than R4,000 crore are required to dilute only 10%, and would have an additional time frame of three years to achieve minimum public shareholding of 25%.
The last four public issues, where companies raised close to R5,514 crore, more than 70% of the money was towards secondary market sale. InterGlobe Aviation — the biggest IPO since December 2012 — raised R 3,018.2 crore from the primary markets. Of the total portion, amount of fresh issue was only R1,272 crore, while rest of the money was mopped up to provide partial exit to promoters and promoter group, data showed.
Most recent entrants into the successful IPO list – Alkem Laboratories and Dr Lal PathLabs – were completely OFS issues as companies did not raise any money for their business requirement. The value of both the IPOs is around R2,000 crore.
Satyen Shah, executive VP and head – ECM, Edelweiss Investment Banking, said that 2015 was a mixed bag for IPO markets with issues like Alkem Laboratories and Dr Lal were completely secondary market sale, whereas issues like Coffee Day Enterprises (CDE) were completely fresh issues.
“2015 was a fairly good year for primary markets. Many a times offer for sale component was there to meet with the regulatory requirements of minimum offer size or to ensure that there was adequate float in the offering,” Shah explained.
CDE tapped primary markets in October to raise R1,150 crore. Although the complete offering was a fresh issue, CDEL planned to use R638.2 crore of the total money raised to repay existing loans, according to information made available in the regulatory filing.
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