Volatility in the equity market has not deterred companies from raising funds from the primary market. Since the beginning of August, four companies have filed their draft prospectus with Securities and Exchange Board of India (Sebi). Participants expect more activity on the primary market front in the months to come as they believe that the India growth story has not derailed.
Matrimonial.com, Teamlease Services, Alkem Labs and Dr Lal Path Labs have filed draft prospectus and plan to raise over Rs 1,000 crore via IPOs.
“These filings signify the positive view among investors about the long-term prospects of our markets despite the recent turbulence. The filings will stop as and when investors take a bearish view of the Indian markets. Filing draft documents doesn’t essentially mean the IPO is happening immediately. I am sure the companies will wait for the secondary markets to stabilise before actually going for the public issue,” said Prithvi Haldea, chairman, Prime database.
As per Sebi regulations, companies can go for the initial public offering (IPO) anytime within a year from the date of approval for the issue.
“When the markets were bullish, retail investors subscribed to primary issues, which were priced as high as 10-12 times the earnings of the respective companies. But during volatile times, retail investors become cautious. Given that they are crucial for the success of any public issue, companies would be forced to bring some sanity to the pricing. This was already evident in the issues that happened during the last week of August,” said B Madhuprasad, chairman, Keynote Corporate Services.
The impact of the stock market slump in the last week of August was felt on the public issue of Prabhat Dairy — the last company to tap the primary market — as it failed to get fully subscribed in the first three days of the issue. The company had to lower its price band and extend the issue by three days.
During the current calender year, companies have raised nearly Rs 6,000 crore from the primary markets — a three-year high.