IPO mobilisation at nine-year high

The first half of 2016/17 is expected to end with a mobilisation of Rs 17,283 crore through initial public offerings (IPOs). According to PRIME database, this would be the highest amount raised in the first half of the last nine fiscal years. The previous high was Rs 21,244 crore in 2007/08.

Amounts raised through equity offerings in the first half of the last 10 years.

This IPO mop-up also represented a more than three-fold rise over the corresponding period of the preceding year (Rs 4,950 crore). Going by the number of issues, there were 56 IPOs compared to the previous year, according to PRIME database. Of the 56 IPOs, there were 15 main board IPOs mobilising Rs 16,924 crore (98 per cent of the amount) with the balance 41 being SME IPOs mobilising a small amount of Rs 358 crore.

ICICI Prudential Life Insurance (Rs 6,057 crore) was the largest main board IPO while Radhika Jeweltech (Rs 47 crore) was the largest SME IPO. The average deal size for the main board IPOs was a high Rs 1,128 cror         e.

In terms of the method of offering, all 15 of the main board IPOs were through the book-building route. Three SME IPOs too were through the book-building route while the balance 38 SME IPOs adopted the fixed price method.

All 15 main board IPOs had anchor investors, which collectively subscribed to 30 per cent of the total public issue amount. The domestic institutional investors played a significant role as anchor investors, with their subscription amounting to 15 per cent of the issue amount, which incidentally was the same as that of the FIIs.

Several companies that hit the market had a prior PE/VC investment. This was true for 7 out of the 15 main board IPOs. Offers for sale by such PE/VC investors at Rs 2,906 crore accounted for 17 per cent of the total IPO amount. The response from the public to the mainboard IPOs of the year, according to PRIME, was good. Eight IPOs received a mega response: Advanced Enzyme Technologies at 82 times, Quess Corp (81), Thyrocare Technologies (52), RBL Bank (49), Mahanagar Gas (45), Ujjivan Financial Services (29), Dilip Buildcon (15) and Equitas Holdings (12).

As far as retail investors are concerned, the period witnessed a good response from them. The highest number of applications was received by Larsen & Toubro Infotech at 10.25 lakh, followed by RBL Bank (10.16 lakh), Mahanagar Gas (9.36 lakh), Advanced Enzyme Technologies (7.6 lakh) and Thyrocare Technologies (7.01 lakh).

According to PRIME, due to the big issue of ICICI Prudential (6,057 crore), the financial services/banking/term lending sector had the dominant share (49 per cent of the total amount). This was followed by the power sector with four issues raising Rs 3,072 crore (14 per cent) and Information Technology with four issues raising Rs 1,678 crore (8 per cent).

"We are now starting to see even larger size IPOs hitting the market. On an overall basis too, the pipeline looks promising. At present, 16 companies planning to raise Rs 5,745 crore are holding SEBI approval and another 5 companies intending to raise Rs.6,810 crore have filed with SEBI and are awaiting approval", says Pranav Haldea, Managing Director, PRIME Database.

According to PRIME, only 19 per cent of the total amount raised in the first half was raised through fresh capital, which typically goes into creation of productive assets, while the remaining Rs 17,298 crore was raised through offers for sale where the proceeds go to the sellers-government, promoters, venture funds, among other investors and not to the company.