Equity fund raising going out of flavour?

During the first quarter of current fiscal, Indian companies raised Rs 9,351 crore via equity (share sale), a drop of 18% from the same period last year.

Moreover, this is the lowest accumulation of funds from the equity markets since 2012-13 when companies raised a paltry Rs 718 crore. In the given three months, companies raised Rs 10,455 crore, Rs 14,049 crore and Rs 11,392 crore in 2013-14, 2014-15 and 2015-16, respectively.

This is in spite of initial public offerings (IPO) touching a 9-year high and offer for sale (OFS) through stock exchange recording an 88% growth.  

Off the total amount, the amount raised via fresh capital was around Rs 2,312 crore; while the remaining was from offer for sale.

Equity markets consist of IPOs, Follow on Public Offer (FPO), OFS, Quality Institutional Placements (QIP), Institutional Placement Programme (IPP) and Indian depository receipt (IDR).

In the June quarter, IPOs clocked over two-fold jump at Rs 5,855 crore against Rs 2,322 crore in the same period of last year.

While OFS through stock exchange, grew by 88% to Rs 3,033 crore compared to Rs 1,610 crore in the similar period of previous year.  

Noticeably, these were the only two sections which boosted equity in reaching the current level. 

What has turned bitter, is that the QIPs were on a 4-year low in Q1FY17 after being the major contributor in previous year.

QIPs were down by 94% to Rs 473 crore against Rs 7,460 crore in Q1FY16, as private capex cycle remained slow, leading to low requirement for fresh money.

Pranav Haldea, Managing Director, PRIME Database said, “QIP is a worrying sign as despite largely bullish secondary markets (and QIP being a bull market product), not too many companies have shown an interest in raising fresh capital for growth/expansion.”

FPOs have been nil during April-June quarter since past 5 years.

The highest raising from FPOs was Rs 10,571 crore in 2007-08. Also IPP and IDR have also maintained the zero status constantly since two years.

According to Haldea, the rest of 2016-17 looks very promising. “As of today, there are 19 companies holding SEBI approval wanting to raise over Rs 7,705 crore and another 5 companies wanting to raise about Rs 3,230 crore awaiting SEBI approval. Many more filings are expected in the near future,” he said.