India Inc is accessing the capital markets like never before. Money mopped up by companies this year could surpass the records reached in 2007, when they picked up Rs 65,344 crore by way of initial public offerings (IPOs), qualified institutional placements (QIPs) and follow-on public offers (FPOs). In all, companies both in the public and private sector have raised close to Rs 64,363 crore and with the Coal India issue expected to mop up Rs 16,500 crore, money raised from the primary market in 2010 would be the highest ever.
Says S Ramesh, chief operating officer, Kotak Investment Banking: ?The flows into equity markets from overseas are unprecedented. Moreover, the markets have returned money to investors because the listings have been at prices much above the issue price. That apart, the quality of paper from the government?s disinvestment portfolio is also very good.?
The flood of new paper is not expected to hurt the secondary market, which is on a roll with the Sensex well above 20,000 points. And investor confidence is back. ?The supply will only have a marginal impact on the secondary market,? believes Madhabi Puri Buch, MD & CEO, ICICI Securities, who adds that there is enough liquidity in the globe to go into the secondary market as well as the primary market.?
The amounts raised in the primary market in 2008 and 2009 were Rs 19,385 crore and Rs 49,656 crore respectively. Prithvi Haldea, CMD, Prime Database, points out that not too much money was raised in the last two years. Haldea adds that demand from corporates hasn?t risen substantially and that it?s the government that is divesting its holdings. FIIs have invested Rs 23,510 crore in the primary market in 2010 till date, which adds up to about 25% of overall FII inflows of Rs 93,121 crore.
So far this year, a total of 52 IPOs, 36 QIPs and five FPOs have hit the market. With mega issuances from public sector companies such as REC, NTPC and NMDC, the five FPOs this year has raised Rs 22,871 crore, which is higher than in any of the last four years. The IPO amount raised this year stands at Rs 18,863 crore, lower than the Rs 33,782 crore collected in 2007. However, that number will jump past that of 2007, after the Coal India issuance. QIP momentum, on the other hand, has slowed down a bit since the beginning of the year. ?There is enough world money available, seeking good investment opportunities and as long as the sentiment remains strong and the pricing good, liquidity is not a concern,? said Haldea, who points out that the BSE Sensex had touched new highs in 2007 despite robust inflows into the primary market.