Even as India Inc is set to raise Rs 62,000 crores via IPOs from the primary markets before the end of 2017, JP Morgan says that more needs to be done to absorb liquidity in the markets. In conversation with CNBC TV18, Kalpana Morparia, the Chief Executive Officer of South Asia and India Operations at JPMorgan Chase said, “ There is this wall of liquidity coming in. You’ve seen the kind of inflows we received in the mutual fund industry, I’ve not seen this in the last 42 years.” According to news reports, 26 companies have already filed their offer documents with the Securities and Exchange Board of India (Sebi) for offerings worth 62,000 crore.
Mutual fund investing in India has reached unprecedented levels as investors pumped in a staggering Rs 20,362 crores into equity mutual funds in August, taking the tally of the overall industry AUM to Rs 20.6 trillion. “Everyone is chasing good investment thesis to invest in,” she observed. Given the record inflows in August, there is the fear of froth building up even as fund managers grapple to find value picks. Mutual fund industry as a whole will find it difficult to find stocks at reasonable valuations as there has been a massive drop in overall profitability of the companies, Nilesh Shah of Kotak Mutual Fund told CNBC TV18 recently.
According to data from prime database, over 150 companies have showed interest to raise capital worth around Rs 2.5 lakh crore through initial public offerings (IPOs), qualified institutional placements (QIPs), and follow-on public offerings.
The expert is worried about the issues being heavily oversubscribed. “Nobody likes 300 times subscription. There’s obviously something wrong with the 300 times subscription. I’m hopeful that we will see a lot more primary issuances coming up in 2018,” she said. Of late, the Initial public offering (IPO) of construction firm Capacit’e Infraprojects saw bumper demand as the issue got overall subscribed at 186.45 times on the last day of the bidding process on Friday.
According to S Ramesh of Kotak Investment Banking, India Inc is set to raise Rs 1 lakh crore in the next 12 months. Talking specifically about mutual funds, he told CNBC TV18 recently, “If you look at the Mutual Fund collection, it’s nearly Rs 6,000 crores a month. Out of the Rs 1 lakh crore expected to be raised by the Indian markets, a lot of paper is by the insurance and banking and financial services (companies).”
Kalpana Morparia of JP Morgan said, “ The IPO pipeline has been good, but not been great. I would see many more billion plus dollar kind of capital raisings coming in over the next 12-15 months, which should bode well for all the liquidity we’ve seen.”