Fundraising Via IPOs Falls 60% In 2019 As Indian Economy Sputters
Reflecting the woes of the broader Indian economy, fundraising through initial public offerings fell by 60 percent in 2019 over the previous year.
Sixteen IPOs in 2019 raised Rs 12,362 crore as compared to 24 IPOs in 2018 that raised Rs 30,959 crore, according to data collated by Prime Database.
That the economy is in bad shape—India’s GDP growth rate fell to over-six-year low of 4.5 percent in July-September 2019—is clear from the fact that 47 companies that received approvals to raise Rs 51,000 crore via IPOs allowed them to lapse.
But driven by offer-for-sale and qualified institutional placements, the street saw 28 percent growth in overall fundraising at Rs 81,174 crore in 2019, against Rs 63,651 crore in 2018, but this is 49 percent lower than the all-time high of Rs 1,60,032 crore raised in 2017, says Pranav Haldea, managing director at Prime Database Group.
The year 2017 saw 36 IPOs mopping up Rs 67,147 crore, while 2016 saw 26 issues collecting Rs 26,494 crore and Rs 13,614 being raised in 2015 through 15 issues and 2014 being the worst at Rs 1,201 crore from five IPOs, show the data.
At Rs 2,850 crore, the largest IPO in 2019 was that of Sterling and Wilson Solar Ltd. The average issue size was Rs 773 crore.
Only three of the 16 IPOs that hit the market had a prior private equity/venture capital investment, a notable change from previous years. OFS by such PE/VC investors stood to Rs 803 crore, accounting for just 6 percent of IPO amount. OFS by promoters stood at Rs 7,513 crore, or 61 percent of total IPO amount.
Seven IPOs were subscribed more than 10 times—IRCTC Ltd. (109), Ujjivan Small Finance Bank Ltd. (100), CSB Bank Ltd. (48), Affle (India) Ltd. (48) times, Polycab India Ltd. (36), Neogen Chemicals Ltd. (29) and Indiamart Intermesh Ltd. (20).
One issue was subscribed by more than three times, and the remaining seven were subscribed between one and three times.
On the listing side, however, 2019 proved to be good for IPOs.
Of the 15 IPOs that got listed, seven gave a return of more than 10 percent, based on closing price on listing day. IRCTC gave a return of 128 percent, followed by CSB Bank (54 percent), Ujjivan (51 percent), Indiamart Intermesh (34 percent), Neogen Chemicals (23 percent), Polycab India (22 percent) and Affle India (17 percent).
Significantly, unlike in previous years, only two IPO stocks are trading below the issue price. The rest 13 stocks are trading between 21 percent and 170 percent above the issue price as of Dec. 23.
For the first time since the SME platform was started five years ago, IPO activity in the segment declined in 2019. There were only 50 SME IPOs in the past year, collecting a paltry Rs 621 crore as against 141 issues in 2018 worth Rs 2,287 crore, 133 issues in 2017 raising Rs 1,679 crore, 67 issues raising Rs 537 crore in 2016, 43 issues raising Rs 260 in 2015 and 40 IPOs collecting Rs 267 crore in 2014.
Offers for sale to dilute the promoter shareholding witnessed a massive jump—from Rs 10,672 crore in 2018 to Rs 25,811 crore in 2019. OFS accounted for 32 percent of the total public equity markets amount in the year.
The street saw 11 companies mobilizing Rs 35,238 crore via QIPs, which is 112 percent more than Rs 16,587 crore raised in 2018. The largest QIP of 2019 was from Axis Bank Ltd., which raised Rs 12,500 crore—35 percent of the total QIP amount for the year.
QIPs were dominated by banks, non-banking financial companies and real estate companies, accounting for 87 percent (Rs 30,688 crore) of the overall amount.
Real estate investment trusts, or REITs, and infrastructure investment trusts, or InvITs, also saw good traction. The past year witnessed the first-ever REIT listing in India—Embassy Office Parks—which raised Rs 3,874 crore. The overall amount raised through InvITs and ReITs was 127 percent more than in previous year.
Of the total Rs 81,171 crore raised during the year, Rs 45,937 crore, or 57 percent, was fresh capital while the remaining Rs 35,234 crore was from offers for sale. The year was bad for government divestments—Rs 17,744 crore, or 17 percent, against the budgeted Rs 1,05,000 crore for 2019-20.
The IPO pipeline for 2020, however, looks strong. Twenty-one firms have received the market regulator’s approval to raise as much as Rs 18,700 crore via initial share sales. Another 13 are awaiting approval to raise a further Rs 18,000 crore.