The number of offer documents filed by companies looking to tap the capital market, has seen a significant drop in 2011.
So far, only 20 companies have filed their draft offer documents with Securities and Exchange Board of India (Sebi), compared to 34 in the three months to March 2010. Companies are opting not to raise money till the secondary market stabilises, which could take a few more months.
In March, only six companies including the state-run Power Finance Corporation, have filed their papers.
?Companies are exploring other funding options like private equity,? said Prashant Shetty, MD, investment banking, IDFC Capital. Adds Yogesh Kapur, MD, investment banking, Enam Securities, ?Those companies which need funds urgently are looking at other avenues.?
Typically, the number of offer documents filed tends to be high in the last month of every quarter.
For instance, during March and September last year 18 and 22 companies respectively had filed for draft offer documents. However, this year, a volatile secondary market has made fund-raising through the IPO route difficult with just R 8,089 crore having been raised by 16 companies compared with R36,000 crore raised during the same period of 2010.
Since it could be a couple of months before conditions in the secondary market stabilise, companies would rather file their papers with the regulator after the results for the March, 2011 quarter so that they would have time till September to raise money.
Market regulator?s norms say a company cannot access the capital market with a prospectus that has financial information more than two quarters old. ?Interest in new paper is currently low so it doesn?t make sense to file and not come out with the IPO,? said Kapur.