NEW DELHI: An economic slowdown and a roller coaster ride for Indian equities this year saw money raised by IPOs falling to a five year low of Rs 12,982 crore for the calendar year 2019, nearly 60 per cent less than last year. This huge drop in initial public offerings (IPOs) happened even though some 28 per cent more was raised through various kinds of equity offerings in 2019, mostly through private offers of sale by promoters and qualified institutional placements to large financial investment firms, according to data collated by Prime Database.
“The reality is that financials of large and mid-cap firms have been deteriorating, while PSUs have been putting off their IPO plans keeping in view the market, that is why we are witnessing a drying up of IPO,” said Vikram Sahny, an investment consultant and director of one of Delhi’s oldest stockbroking firms Sahny Securities Pvt Ltd.
India’s gross domestic product (GDP) grew by just 4.5 per cent in the July-September 2019 quarter, while factory production shrank for three consecutive months till October 2019. From automobile to toilet soaps, consumer goods companies have been reporting falling sales. Just 16 IPOs from major companies came to the market collectively raising Rs 12,362 crore, according to Pranav Haldea, managing director, Prime database Group.
At the other end of the spectrum, during this calendar year, some 47 companies looking to raise over Rs 51,000 crore, allowed their Securities and Exchange Board of India approval for an IPO to lapse, despite the money and time already invested in getting the permission.The IPO market had peaked in 2017, with issuances worth Rs 68,246 crore with a host of small and medium-sized enterprises floating their scrips in the market.
Last year saw that figure drop to Rs 33,246, while the current calendar year proved most challenging for IPOs on the back of shrinking growth, poor financial results by many corporate and a number of non-banking financial companies and banks falling by the wayside. However, Sahny said “we expect 2020 to be far better. The government has taken a number of measures to resuscitate the economy and those should start paying off after a time lag. This should translate to a better financial condition in the market.”