Move over the IPO record in 2017; share buybacks, dividends trump capital raising

By: | Published: September 6, 2017 11:55 AM

The current year 2017 is turning out to be the best year yet for companies looking to raise capital in primary markets through IPO. However, it’s not the capital raised, but the capital returned, which should grab the investor interest.

This year, leading Indian companies have come up with huge share repurchase programmes, including three mega share buybacks by the three leading information technology services firms itself. (Image: Reuters)

The current year 2017 is turning out to be the best year yet for companies looking to raise capital in primary markets through IPO. However, it’s not the capital raised, but the capital returned, which should grab the investor interest. Capital market regulator SEBI chairman Ajay Tyagi said on Wednesday that the capital returned in the form of share buybacks and dividends is one-and-a-half times of the funds raised via IPOs (initial public offer) for sale of equity shares.

This year, leading Indian companies have come up with huge share repurchase programmes, including three mega share buybacks by the three leading information technology services firms itself. Tata Consultancy Services returned Rs 16,000 crore to shareholders by buying back 2.85% of the company’s paid up equity at a fixed price of Rs 2,850 per share. Meanwhile, Infosys has also announced a Rs 13,000 crore share buyback, which will be soon put to a shareholder vote. Wipro Ltd’s shareholders have already approved its proposed Rs 11,000-crore share buyback.

Similarly, companies have also distributed their profits back to the shareholders in the form of dividends as well. Reliance Industries Ltd announced a Rs 11/share dividend, amounting to over Rs 3,900 crore for the year that ended 31 March 2017.

IPO in 2017 to hit all-time high

On the other hand, IPO fundraising in India is likely to touch an all-time high this year, SEBI’s Ajay Tyagi said at an event, adding that India remains a bright spot amongst the major economies. Earlier last month, a Bloomberg news report had quoted ICICI Securities’ Investment Banking Head Ajay Saraf as saying that total fundraising via IPOs could rise to Rs 50,000 crore this year. The previous record is Rs 36,300 crore worth of IPO money raised in the year 2010.

The current year 2017 has seen over 17 IPOs so far, including high profile ones such as that of BSE Ltd — the first stock exchange to get listed in India — HUDCO, Cochin Shipyard, CDSL, D-Mart, among others, together raising over Rs 12,000 crore. In the current month September alone, as many as four companies have lined up their IPOs to raise over Rs 2,500 crore put together. Bharat Road Networks Ltd’s IPO for raising about Rs 600 crore; and Dixon Technologies’ IPO, also of the same amount, opened today for subscription. Going further, five insurance companies are expected to collectively raise up to Rs 40,000 crore before the end of 2017.

Earlier last month, Gautam Chhaochharia, Head of India Research, UBS, said in an interview to Bloomberg television that the record IPOs this year is positive for the economy, as this is the way the financial markets feed into the real economy. “Any capital raising is an early sign and a welcome sign for growth outlook for longer term,” Gautam Chhaochharia said in the interview.

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