Promoters of about 75 companies, seeking to collectively raise Rs 85,000 crore through IPOs, would be a rather worried lot: The Indian primary market is in danger of grinding to a halt because of liquidity problems, and the sliding secondary market isnt helping much.
Communication infrastructure provider Dinesh Engineers is the first casualty of the falling market as the company withdrew its IPO last week after it was subscribed just 17 per cent on the third and last day of the offer.
According to merchant banking sources, almost all companies getting approval from the market regulator have postponed their offers by a few months, citing the lack of appetite among investors because of higher market volatility.
“A mix of macro and local issues has affected the secondary markets and issuers will wait for confidence to return to the market,” said Ravi Sardana, executive vice president, ICICI Securities. “In a volatile market, it is difficult to predict demand and fix the valuation.”
The Sensex has plunged 12 per cent from its all-time high reached August 29. About 15 out of 22 IPOs that were listed in the current year are currently trading 6 per cent-60 per cent below their offer price. ICICI Securities, which raised Rs 4,017 crore in March this year, is currently trading 54 per cent below its offer price.
Similarly, Indostar Capital and Bharat Dynamics are trading at 50 per cent and 40 per cent below their issue prices.
Currently, 43 companies have received Sebi nod to raise about Rs 50,000 crore, while 33 companies have filed their draft red herring prospectus (DRHP) with the market regulator Sebi to garner about Rs 35,000 crore.
“We have not seen this kind of an IPO pipeline in the last five years,” said Pranav Haldea, managing director, Prime Database. “However, if the current market condition continues, promoters of 75 odd companies have a cause for worry.”
Poor response to some recent issues and the rocky ride lately for the markets have forced the companies to postpone their IPO plans. So far in 2018, 24 companies have raised Rs 31,038 crore, compared to Rs 67,147 crore raised by 36 companies last year.
“A number of companies that have filed the DRHP with Sebi are in the wait-and-watch mode, given the volatility in the secondary markets,” said Nipun Goel, head of investment banking, IIFL. “They would rather wait for the markets to stabilise before going ahead with their respective IPOs.”
Renewable energy firm ACME Solar Holdings has withdrawn its Rs 2,200-crore IPO plans. Reliance General Insurance, which received the final Sebi nod for an IPO on November 29 last year, is learnt to have postponed the issue.
Restaurant chain Barbeque Nation Hospitality is also learnt to have delayed the IPO plans. Sebi approvals for CMS Info Systems, Seven Island Shipping, Prince Pipes and Fittings, and Gandhar Oil refinery are scheduled to expire in the next two months.