Slowdown in IPO market spills into 2012
The calendar year 2012 started positively for domestic capital markets with significant FII inflows, yet, the momentum could not spill over to initial public offering (IPO) markets with as many as 4 IPOs — combined to the tune of Rs 701 crore — were already called off in the first month of the CY.
The four entities despite having valid Sebi approvals could not open their IPOs within the validity period of one year. The names of the IPOs being called off are: Micromax Mobiles (IPO amount Rs 426 crore), Pride Hotels (Rs 125 crore), Betul Oil (Rs 100 crore) and Tara Jewels (Rs 50 crore).
In this context, SMC Global Securities Strategist & Head (Research) Jagannadham Thunuguntla points out that the four IPOs called off in the current calendar period was in continuation of the IPO market challenges in the calender year 2011, when about 29 IPOs were called off.
Much of the fiscal targets could have been met had these 29 IPOs combined to the tune of Rs 32,398 crore had not called off and succeeded in the capital market.
Further, Thunuguntla continued, there are atleast 10 other companies who have valid SEBI clearance in hand and are left with two months in their validity period of one year from the date of approval. Such companies include Joyalukkas India, Lokmat Media, Aravali Infrapower, VRL Logistics and Embassy Property Developers. The total amount to be raised from these 10 IPOs is estimated at Rs 4,210 crore, said he.
Market analysts also aver that the IPO market is not getting the kind of momentum that is expected to happen in the context of the government's disinvestment program which is also in ‘wait and watch’ mood.
“If this slowdown in IPO market continues,” points out Thunuguntla saying there will be significant impact on the fund raising abilities of Indian companies. If that’s not enough, it “will also have impact on the ability of exits for private equity funds,” said Thunuguntla.
