India Inc’s fund raising through initial public offerings (IPO) rose to a two-year high this fiscal, according to data from Prime Database and market sources. Corporates have mobilised over R1,400 crore so far in FY15, up 16.3% from full-year FY14 IPO activity, data showed.
Five companies – Sharda Cropchem (R351 crore), Monte Carlo Fashions (R350 crore), Snowman Logistics (R197 crore), Wonderla Holidays (R181 crore) and Shemaroo Entertainment (R120 crore) – raised R1,200 crore on the main board for the eight months to December. An additional 26 companies mobilised R201 crore on the SME platform of stock exchanges.

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Investment bankers said the “business-friendly” tag and slew of reforms undertaken, and in the reckoning, by the new government are among the factors prompting companies into capacity expansion a nd debt reduction.

More importantly, the secondary market performance has given corporates and bankers greater confidence on investor appetite and better valuations. More companies will follow suit in the last quarter of FY15, they said.

“I think everyone was waiting for the elections. There will be a flurry of activity in the IPO market. Elections played a big role,” said Ajay Saraf, ED & head of corporate finance and institutional equities, ICICI Securities in a recent interview.

If market data is to be relied upon, another eight to 10 companies have received observations from Sebi. These companies have the potential to raise anywhere between R4,500-6,000 crore. These include Rashtriya Ispat Nigam (RINL) which could raise R2,000-2,500 crore as part of the government’s FY15 disinvestment programme, Inox Wind (R700 crore), Adlabs Entertainment (R500 crore), and Lavasa Corp (R750 crore).
Bankers explained that primary markets lag the pick-up in secondary markets by about six to eight months. While the Street foresees investor fatigue to creep in, given the huge pipeline of equity fund raising, investment bankers remain confident about the sustainability of the bull market and fund raising activity connected with it.

Indian markets are the second-best performing markets in the world, closely following China. The Sensex has garnered returns of more than 31% in CY14.
Investment bankers said the markets will be governed by mid-market deals ($100-300 million), but ruled out the possibility of very large-sized (bulge-bracket) IPOs like Coal India, Reliance Power, DLF, or even Alibaba in the US.
Corporates raised R1,204 crore last year and about R6,500 crore the year prior. India Inc saw record fund raising in FY11 (R33,097.77 crore).

“We expect the momentum to sustain on the back of a stable government. Unless something untoward happens, this could lead to a long-term cycle of equity fund raising. If things go as planned on the economy, this could be the biggest long-term bull market we are going to see,” said the head of a global investment banking firm in Mumbai.