IPO mobilisation has hit the highest level in a decade and a half. But the data shows that only a small portion of this money raised has gone to the companies for growth and expansion, according to Indian Express report. It has been learnt that of the Rs 46,239 crore has been raised through IPOs in 2017 until October 27, 2017. The data shows a record 80 per cent or Rs 37,089 crore has gone towards offer-for-sale in these public issues. A mere Rs 9,150 crore has gone to the companies in the form of fresh capital issued.
According to data from prime Database for the last 16 years, IPO mobilisation has been the highest this year. The previous high was Rs 37,535 crore in 2010. The data shows the share of fresh capital in the issues is at its lowest percentage — less than 20 per cent of the total issue size (the previous low being 24.5 per cent in 2003).
The data shows that mobilization through offer-for-sale is at an all-time high this year both in absolute terms and in percentage terms and thus the money has mostly gone to investors offering to sell their holding in the companies, thereby making either a partial or a full exit.
According to experts, if a company raises fresh capital, it reflects the fact that it perceives a pick-up in economic activity in the near future and has plans for business expansion and growth. But that’s not the case when shares being offered during IPOs are those comprising offer for sale.
“This is not a healthy trend for the economy. This is an opportunistic activity by existing investors to sell their holding through OFS and the risk of equity is being transferred to retail investors,” said C J George MD, Geojit Financial Services. Pranav Haldea, managing director, Prime Database, calls this as a “worrying trend” and said that companies from manufacturing or services sector are not raising fresh capital. He however, said that “with the government making investments, private investment will follow.”