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IPOs in 2017 focus on giving exit route for PEs, not capital expansion

LiveMint logoLiveMint 23-06-2017 Nasrin Sultana

Mumbai: Despite the heavy rush for launching initial public offering (IPO) in 2017, little has changed in investment demand pick-up so far. Like previous years, the IPO boom is driven by offers for sale (OFS) that give an exit route to private equity (PE) players or existing shareholders rather than raising funds or capital expansion.

According to Prime Database, 12 issues hit the primary markets so far this year raising a total of Rs9,716.70 crore. However, only one issue was meant for raising capital, and the rest were either just offers for sale or were meant for both purposes.

Avenue Supermarts Ltd is the only IPO this year which raised capital through the issue. Radhakishan Damani-promoted Avenues Supermarts Ltd, the parent of retailer D-Mart, was subscribed a staggering 104.48 times. It raised Rs 1,870 crore through the issue and saw a rise of 104% on debut day at the exchanges on 21 March.

Other companies that came up with IPOs in 2017 are BSE Ltd, Music Broadcast Ltd, CL Educate Ltd, Shankara Building Products Ltd, S Chand and Co. Ltd, Housing and Urban Development Corp. Ltd, PSP Projects Ltd, Tejas Networks, Eris Lifesciences, Central Depository Services (India) Ltd and GTPL Hathway Ltd.

The trend was also seen in 2016, which was considered to be one of the bumper years for IPOs in five years. Last year, 26 issues raised Rs26,493.84 crore but only six of them were meant for raising funds.

According to Pranav Haldea, managing director at Prime Database, though there is a beeline of IPOs in 2017, there is missing confidence in companies to raise capital. “Fund raising still needs to pick up pace in India and to some extent it is definitely concerning. Even qualified institutional placement (QIP) segment has been very tepid in last two-three years. In the last six months, only financial companies have raised funds through QIPs,” he added.

However, he added that an exit route to existing shareholders and PE through IPOs provides them opportunity to pump funds in other companies.

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