Lull before the storm

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Strict debt fund rules on anvilFIIs sell shares worth Rs 910 cr

: price of Rs 207 per share.

Sanjay Kumar Taparia, director & chief executive officer of Tulsi Extrusions, echoes a similar point of view, “We were lucky to have emerged unscathed at a time when the markets were volatile.” The IPO size of the Jalgaon-based company that manufactures PVC pipes and fittings was Rs 50 crore.

Emaar MGF, SVEC Constructions and Wockhardt Hospitals, of course, were not so lucky. Despite SVEC Constructions and Wockhardt Hospitals not being large issues at Rs 38 crore and Rs 775 crore respectively, the investor response to them was poor. Total subscriptions were just about 24% and 19.5% respectively.

Emaar, in contrast, had its IPO book almost 85% subscribed. Yet the company decided against continuing with its IPO. Says Shravan Gupta, executive vice-chairman and managing director, Emaar MGF Land Ltd, “Completing the IPO book wasn’t an issue. Our QIB and HNI portions were fully subscribed. We took a call that investors could suffer post listing in these volatile times, which is why we opted to withdraw. But we are leaving the option open of coming back at a later date. We will come back with an IPO.”

Other players are also not averse to coming back to the capital market at a later time. Says Sreeman Chalasani, executive director of Hyderabad-based SVEC Constructions Ltd, “We are not ruling out the possibility of coming back to the capital markets at a later stage.”

Suffering a loss on account of calling off its IPO is not deterring companies. Says Gupta of Emaar, “I don’t see this as an issue because we are not desperate for capital. We do have some breathing space. Plus our debt-equity ratio is less than one. So the option of taking debt at the holding company or SPV level is there.”

Besides debt, the option of private equity is also available to a firm. It’s something that both Emaar and SVEC are not averse to. The former already tapped into it at the pre-IPO stage, where it garnered about Rs 5,000 crore, according to Gupta.

One reason for this urge to come back to the capital markets is the valuation that a company can enjoy through the exercise. That is the single biggest reason that draws a company to a public listing.