Fund-raising via IPOs at 11-year low

Mar 27 2014, 17:48 IST
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SummaryBharat Business Channel’s Rs 700-crore IPO fails to take off

Secondary equity markets may be on cloud nine, having risen more than 10% in the last one month, but the magic is yet to rub off on India's primary markets.

The pessimism is evident as the R700-crore initial public offering (IPO) of Bharat Business Channel (BBC), the direct-to-home satellite television arm of Videocon Group, failed to take off, owing to unfavourable market conditions, showed statistics compiled by Prime Database.

“Even as the stock market has rallied, the sentiment remains weak and uncertain. There is no appetite for the (Bharat Business Channel) issue, especially on the retail front,” said one person familiar with the matter, requesting anonymity. Bharat Business Channel is not alone. Mumbai-based manufacturer of pharmaceutical raw materials, Calyx Chemicals & Pharmaceuticals, also failed to launch its R180-crore issue before its January 17 deadline this year.

Iron and steel maker Loha Ispaat failed to receive full subscription even after the Mumbai-based company reduced its price band and extended issue deadline by almost a week. The issue was subscribed nearly 0.8 times, with retail investors’ book subscribed just 0.3 times, stock exchange data showed.

Securities and Exchange Board of India's (Sebi) approval to launch a public issue is valid for one year. BBC had received Sebi approval on March 15 last year, and was the second biggest issue in the pipeline following the success of Just Dial in May last year. Regional cable television service provider Ortel Communications' issue is the biggest IPO in the pipeline with an estimated size of R1,000 crore.

Ortel is permitted to tap the primary market before June 26, 2014. Companies that failed to launch their issues in the last 6-8 months include the state-owned Rashtriya Ispat Nigam (R2,500 crore), minerals and mining company ACB India (R1,000 crore), financial consultancy firm IFCI Factors (R750 crore), Vishwanath Sugar & Steel (R374 crore), and PME Power Solutions India (R350 crore).

Despite the strong performance of equity markets in the last one month, experts feel that Indian markets lack depth and appetite among investors. Moreover, confidence, especially that of retail investors, has dropped to multi-year lows as structural economic issues and lack of progress on policy reforms stemmed India's economic growth to the lowest in a decade.

“There is no depth in the market... We are also talking about some companies with very large issue size. Given the uncertain outlook, investors continue to stay risk averse,” said Prithvi Haldea, CMD, Prime Database.

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