IPOs gain traction in 2016; funds mop-up doubles to six-year best

In a blockbuster performance, over two dozen companies have managed to raise more than Rs 26,000 crore through IPOs in 2016 -- with funds mop-up more than doubling since the previous year to make it the best one for public offers since 2010.

However, the outlook does not appear to be that bullish for the new year amid lingering domestic and global headwinds threatening to slow the IPO market activity, at least in the short run.

Marketmen are keeping their fingers crossed about the fate of initial public offerings (IPO) worth Rs 12,500 crore that are already at final stages of hitting the market.

So far in 2016, 26 companies have managed to collectively raise over Rs 26,000 crore through their respective IPOs, which is more than double the Rs 13,564 crore grossed by 21 issuers in 2015.

Marketmen say that while the first nine months of 2016 saw strong activity in the primary market, weakness started trickling into the secondary market from September and the activity has been slow in the past two months. They also warn that the deepening uncertainty over the impact of the note ban may see a marked slowdown in the short term.

With several issues from diverse sectors such as business services, small finance banks, medical diagnostic companies tapping the market, total funds grossed by 26 issuers in 2016 is the highest since the Rs 37,534.65 crore garnered in 2010, which is the best in history for the market.

While the highlight of 2016 is the first life insurance company -- ICICI Prudential Life -- hitting the market with a Rs 6,057-crore issue and making it the largest share sale of the year, 2017 is set to make history, too, as Asia’s oldest bourse BSE is set to hit the market with a Rs 1,300-crore share sale. If all goes well, even the larger rival NSE may go public towards the end of the year.

The robust show was aided by a proactive regulatory environment coupled with general uplift in investor sentiment following the best monsoons in two years and the resultant positive macro environment.

Market watchdog Sebi has taken numerous steps that have encouraged companies to sell shares. One key enabler was making Asba (Application Supported by Blocked Amount) mandatory for all investors, including retail. Also, Sebi’s proactive approach to the market has ensured investors need not fear about frauds.

The year also saw scores of small firms entering the market through the SME platform of BSE and NSE and raising hundreds of crores of rupees collectively.

Of the over 150 small companies on the BSE SME Exchange now, most entered the market only in 2016 after Sebi made it easy for small companies to go public. These 150 companies together raised more than Rs 1,100 crore, with a market capitalisation of over Rs 12,325 crore. SMEs together raised Rs 721 crore in the year going by, mostly on the BSE platform till September. In the entire 2015, small companies mopped up only Rs 252 crore.

BSE had launched the SME platform in March 2012 while the rival NSE Emerge was launched some time later that year, but is yet to make a mark.

Besides, the performance of the newly-listed companies has also been fairly strong, with over 70 per cent of the main-board IPO companies generating over 25 per cent returns for investors over the issue price. Marketmen point out that barring 4-5 companies, all others have generated positive returns for investors, with firms like Advanced Enzymes and Quest Corp giving over 100 per cent.

The IPO chart in 2016 was led by ICICI Prudential (Rs 6,057 crore), PNB Housing Finance (Rs 3,000 crore), Equitas Holdings (Rs 2,175 crore), Laurus Labs (Rs 1,332 crore), RBL Bank (Rs 1,211 crore), L&T Infotech (Rs 1,236 crore), Varun Beverages (Rs 1,112 crore), Endurance Technologies (Rs 1,162 crore) and Mahanagar Gas (Rs 1,039 crore).

“From a primary market perspective, the first nine months of the year was very good,” Ambit MD for Corporate Finance Premal Doshi said. “However, with the weakness trickling into the secondary market after September, things have been slow in the past two months,” he added.