The correction in the secondary market is forcing companies to hold back their initial public offerings (IPOs), which were earlier slated for this month. Most merchant bankers are waiting for the markets to stabilise so that they could conduct sale of shares at better valuations. The benchmark BSE Sensex is down more than 6% this month and as many as ten companies had planned to launch their offerings in January.
L&T Finance Holdings, IOT Infrastructure, Jindal Power and Muthoot Finance are among the bigger companies which had planned to come up with an IPO this month. It?s very likely that most of them could get pushed to next month, if market conditions fail to improve, said merchant bankers .
Indian Oil co-promoted IOT Infrastructure and Energy Services, which had earlier planned to launch its Rs 800-crore IPO in January, is waiting for the market conditions to improve. ?We are ready from our side. But the market has become very turbulent,? said Jatin Mavani, President (Finance), IOT Infrastructure.
L&T Finance Holdings, a subsidiary of engineering giant Larsen and Toubro (L&T), also had planned to launch its Rs 1,500 crore offering in January, however, is forced to re-think the dates.
?The decision to launch the IPO will depend on various factors, market volatility is one of them,? said Dinanath Dubhashi, Chief Executive, L&T Finance Holdings.
Similarly, Jindal Power, which had earlier planned to launch its Rs 7,200 crore-IPO in December, is considering it post-January. Muthoot Finance, which plans to raise Rs 800 crore, is another company which is being forced to hold back due to weak secondary market.
?The phase and quantum of the correction has been baffling,? said Kaustubh Kulkarni, managing director- investment banking, JP Morgan India. ?The current correction will require companies to delay their IPO plans.?
?Whenever the market stabilises the primary market will be back. The markets could remain subdued for another few weeks and we could see issues happening by the end of January,? said Girish Nadkarni, executive director, Avendus Capital.
?Companies will have to operate in a very difficult environment as fund raising through equity as well as debt becomes difficult,? said Kulkarni.
?People who need the money desperately will suffer. Those who can wait will be better off doing that,? he further added.