Poor market puts paid to IPO plans

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Nov 28 2011, 06:54am hrs
Poor market conditions have forced promoters of a clutch of mid-sized companies to delay their initial public offerings (IPOs). At least 10 such firms, which have already got approvals from the Sebi this year, are staring at the expiry of the deadline for filing their draft red herring prospectus (DRHP).

Companies have to file their DRHP within a year of getting the observation letter from Sebi, failing which they must apply again. So far, in this calendar year, 25 firms have already missed the deadline, choosing to wait till the market sentiments improve.

Reliance Infratel, Jindal Power, Avantha Power & Infrastructure, BPTP, Sterlite Energy and Glenmark Generics are among several companies that have delayed their plans of cumulatively raising more over R30,000 crore. Whats more, an additional offering of R2,000 crore by mid-sized companies is staring at expiry by February.

The reluctance to hit the bourses is only natural: Sensex has been the worst performer in Asia this year, shedding 30%. Similarly, the rupee has depreciated by almost a fifth, putting immense margin pressure for the big manufacturers who import a large chunk of their components.

Even the RBI has opted for inflation over growth, making borrowing costs high for India Inc. Market analysts warn that the fear of the markets would hit industry growth, bringing IIP figures and overall GDP down too. Whats more worrying is that its not just the private sector that is stalling its IPO plans. PSU ONGC has cancelled its follow on public offer plan five times already.

When the government is not sure about how the market would respond to ONGCs FPO, how can company promoters be expected to stick their necks out, Jagannadham Thunuguntla, head, research, SMC Global, said.

Vinay Agrawal, executive director (equities broking) Angel Broking, said most companies that had IPO plans have been waiting for market to hit the bottom. But who knows how low the markets with fall. RBIs rate hikes and inflation have not helped matters either, he said.