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BW Businessworld

All Is Not Well On The IPO Front

Even as much has been talked about the revival in the IPO market, investor participation in the bourses seems to be subdued, raising concerns among analysts about the road ahead

Even as much has been talked about the revival in the IPO market, investor participation in the bourses seems to be subdued, raising concerns among analysts about the road ahead.

While a lot of ventures tapped the capital market with their public issuances, it is factors like expensive valuations and volatility in the secondary markets that kept away participants from the primary market.

‘It’s all a valuation game. If they are high, it’s obvious it will dampen investor sentiment,” said a analyst on condition of anonymity.

Almost, all IPOs that hit the market in the last few days such as Bharat Wire Ropes, Healthcare Global and Infibeam barely managed to scrape through getting subscribed just over one times their issue size. And mind you, this is despite certain companies like Infibeam
spending heavily on advertising - the Rs 450-crore IPO from the ecommerce firm was subscribed only 1.11 times.

On the other hand, Bharat Wires Rope was subscribed 1.21 times, while Healthcare Global was subscribed 1.56 times. If the current situation is any precursor to the future trends, valuations definitely need a correction - only then will the IPO market heat up again!

This comes as a bad news for the market which saw a revival in IPOs only last calendar year after a lull of three years, when corporates actually shied away from Dalal Street adopting a wait and watch policy for better times to come in.

As per research firm Prima Database, the total number of IPOs last year crossed 60, while in 2014 and 2013, the number stood at 45 and 38, respectively. In terms of the value, the revival was further evident. Corporates raised Rs 13,854 crore last year as against Rs 1,468 crore in 2014, which goes on to indicate that the issues that hit Dalal Street in 2015 were of sound companies that had good fundamentals and equally good corporate governance in place. During 2013, as many as 38 IPOs had raised Rs 1,619 crore.

Needless to mention, the revival came in as a big relief to corporates and investors as the market paved the way for fund raising and investment opportunities alike for every stakeholder. However, their positive sentiment now seem to be taking a hit with high valuations doing the rounds on Dalal Street

Going forward, however, analysts say India is likely to see quite a few IPOs if the market and the sentiments continue to be bullish. “Overall sentiment is positive. With not much happening on the domestic market, a large part of the sentiment will depend on how events in the international markets unfold.

Also, what the market currently requires is a few success stories (great post-listing returns) that will automatically prompt people to look at the IPO market seriously. Investors continue to believe that there is still an upside available in the secondary market, where risks are comparatively lower and therefore are putting their money there directly or through the mutual funds.


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