Volatility hits IPOs & QIPs, but OFS value jumps
Mumbai: A volatile equity market is forcing companies to go slow on initial public offerings (IPOs). The last few months have seen a marked dip the number of public issues hitting the primary market. Even the IPOs that have hit the primary market recently received poor response from the investors in this calendar year.
Fund raising by companies has seen a steep fall in other equity segments like qualified institutional placement (QIP) and IPOs of small and medium enterprises (SME), but offer for sales (OFS), in which existing shareholders dilute their stake through the primary market, saw a jump because of mammoth telecom issues.
According to research firm Prime Database, IPOs on the main board of BSE and NSE raised Rs 10,019 crore till August 31, 2019 against Rs 28,508 crore raised in 2018 till August 31.
The number of issues on the main board has nearly halved to 11 IPOs in 2019 so far compared to 21 IPOs hitting the primary market last year.
A silver lining is that barring one company, all other IPOs are faring well and trading above their public issue price.
Fund raising through QIPs this year nearly halved to Rs 8,413 crore as against Rs 16,077 crore last year.
IPOs by SMEs have shrunk by more than a third, with the issues in this segment raising only Rs 515 crore this year compared with Rs 1,707 crore raised last year.
The general elections and the volatile market conditions post-the Union Budget were two key reasons for the sluggish spell in the primary market.
No issues from public sector enterprises have hit the market in this financial year, either. MSTC and Rail Vikas Nigam were the last government-run companies to offer share sale, in March 2019.
However, other means of raising funds in the equity market, like OFS, rights issues and preferential equity issues have seen higher fund raising, according to Prime Database.
Companies have raised Rs 18,573 crore through offer for sale as against Rs 3,495 crore last year.
Mega rights issues by Vodafone Idea and Bharti Airtel have led to fund raising through this mode touching Rs 51,818 crore this year against Rs 17,857 crore raised last year.
Preferential equity issues this year too have been higher at Rs 1,34,934 crore as against Rs 1,23,962 crore last year.