The stock market may have rallied 4% so far this month but looks like this will be the driest month for equity fund raising. Only two companies?Standard Chartered and Dewan Housing Finance?have managed to raise capital totalling Rs 2,781 crore this month. Standard Chartered raised the bulk of it, while Dewan Housing raised Rs 375 crore through qualified institutional placement (QIP) issue.
The initial public offering (IPO) of FatPipe Networks had to be withdrawn due to poor investor response. Another IPO of Parabolic Drugs, which is still open, is struggling to garner full subscription. Only the IPO of Technofab Engineering, worth just Rs 70 crore, and a QIP issue of GSS America, worth about Rs 46 crore, is in the pipeline for this month. That makes June the most lean month for capital raising since November 2009, when about Rs 2,704 crore was raised.
?Secondary markets may be strong but are not conducive as far as new deals are concerned. Most fund houses are busy managing existing portfolios,? said a merchant banker who didn?t wish to be identified.
Most merchant bankers feel the lull in the primary market is due to the volatility in the secondary market. ?The secondary markets are uncertain and that is making the primary markets also uncertain,? said Ambit Corporate Finance managing director Sanjay Sakhuja. ?The uncertainty stems from global problems,? he said. According to Prime Database, there are 35 companies, which together are planning to raise Rs 36,640 crore and have been already got Sebi approval for IPOs. Another 39 companies, planning to mop up Rs 13,534 crore, have filed an offer document with Sebi and are awaiting approval.
Add to that the flood of new paper that will be created due to the new public shareholding norm, which requires all listed companies to have a minimum public shareholding of 25%.
Enam Financial Consultants managing director S Subramanian believes as the June quarter has been quiet there could be ‘bunching up’ in the September quarter. New supply will be a challenge, feels Sakhuja. Whether secondary market will be able to absorb so much, Subramanian believes it depends on the pricing.