5-time jump in amount raised through IPOs in first half of 2015-16, strong pipeline ahead

The first half of the ongoing financial year (2015-16) has ended with a mobilisation of Rs 4,950 crore through initial public offerings. (Express Photo)

The first half of the ongoing financial year (2015-16) has ended with a mobilisation of Rs 4,950 crore through initial public offerings (IPOs), with another Rs 12,916 crore raised through the Offer for Sale through Stock Exchange mechanism (OFS), according to Pranav Haldea, Managing Director of PRIME Database.

This represented a near 5-time increase from the corresponding period of the preceding year in which only Rs 1,017 crore was mobilised. By number, the period witnessed 39 IPOs compared to 25 in the corresponding period of the preceding year. Of the 39, there were 12 main board IPOs mobilising Rs 4,777 crore (or 97 per cent of the amount) with the balance 27 being SME IPOs mobilising a small Rs. 173 crore.

The largest main board IPOs were of UFO Moviez (Rs 600 crore) and Navkar Corp (Rs.600 crore) while the largest SME IPO was that of Amrapali Fincap (Rs 40 crore).

According to Haldea, the high OFS amount is solely due to the government disinvestment programme with Rs 12,733 crore out of Rs 12,916 crore (or 99 per cent) being raised in the OFS of REC (Rs 1,610 cr), PFC (Rs 1,673 cr), DCIL (Rs 53 cr) and IOC (Rs 9396 cr). Haldea added that it is extremely positive to see action on the divestment front in the first half of the fiscal, a period where traditionally small amounts have been raised by the Government in the last several years. This is the highest amount ever raised in the first half through Government disinvestment, the next highest being Rs. 4,035 crore raised in 2009-10.

In all, there were 7 OFS (previous corresponding period 15), which mobilised Rs 12,916 crore (previous year Rs 2,593 crore). The largest OFS was of Rs 9,396 crore (Indian Oil).

Amounts raised through equity offerings in the first half of the last 10 years are as follows:

Source: PRIME Database

According to PRIME Database, only 16 per cent of the total amount raised in the first half (or Rs 2,918 crore) was raised through fresh capital, which typically goes into creation of productive assets, while the remaining Rs 14,949 crore was raised through offers for sale where the proceeds go to the sellers-government, promoters, venture funds and other investors and not to the company.

In terms of the method of offering, all 12 of the main board IPOs, as per PRIME, were through the book building route, with balance 27 SME IPOs issues through the fixed price method. The facility of anchor investors was used by 10 companies.

As per Haldea, even though a general positive sentiment has prevailed in the market, we are yet to see large IPOs hitting the market. The pipeline though looks promising. At present, 19 companies planning to raise Rs 11,545 crore are holding SEBI approval and another 17 companies intending to raise Rs 6,795 crore have filed with SEBI and are awaiting approval.