India Inc's equity mop-up crosses Rs 30k cr in 2012

The fund mop-up by companies through sale of shares has crossed Rs 30,000 crore mark in 2012 despite a volatile market and the figure is expected to be much higher next year, given a strong line-up of capital raising plans through IPOs and other equity issuance routes.

Updated: Dec 23, 2012, 12:49 PM IST

New Delhi: The fund mop-up by companies through sale of shares has crossed Rs 30,000 crore mark in 2012 despite a volatile market and the figure is expected to be much higher next year, given a strong line-up of capital raising plans through IPOs and other equity issuance routes.

Besides plans for initial public offers (IPOs) amid improving market sentiments, a large number of already-listed companies are expected to tap 'offer-for-sale' route in 2013 to raise funds to comply with a regulatory requirement of minimum 25 percent public shareholding.

These companies alone, which include over 100 private sector firms and a few public sector entities, could sell shares worth Rs 26,000 crore as per the current valuations.

Besides, more than a dozen companies, including Just Dial and Videocon D2H, have already filed their draft IPO offer documents with market regulator SEBI and would look to sell shares some time in 2013.

Many others, including retail chain operator Spencer's, Hero Cycles and satellite TV broadcast services of Tata Sky and are also said to be looking to tap the IPO market.

Encouraged by the success of NMDC's share sale, the government has also unveiled a long list of disinvestment candidates, including over 10 blue chip companies such as NTPC, BHEL, SAIL, MMTC and Oil India.

Experts believe that OFS (where promoters can offload shares to any investor through a special one-day window) would be the dominant route in 2013 for share-sale purposes.

Besides those seeking to meet public shareholding deadline, the OFS could also opted by other companies due to an easier and shorter processing time for this route.

"We believe that the OFS window will gain more popularity in the next calendar year and we will continue to see many disinvestments through this route," Destimoney Securities MD and CEO Sudip Bandhopadhyay said.

Echoing a similar view, ICICI Securities Executive Director Ajay Saraf said, "We expect good OFS/IPP activity next year as the private sector companies would need to comply with maximum promoter holding requirement before June next year - already we are seeing high level of OFS activity from private sector companies.

"Secondly, government will also use it as it is a very efficient disinvestment tool, this being a faster and effective mechanism," he added.

In the year 2012, around Rs 30,500 crore were mopped-up through share-sale programme and major chunk of funds, which was Rs 23, 800 crore, garnered through OFS route, and the remaining about Rs 6,693 crore through IPOs.

In comparison, there were 37 IPOs and 2 FPOs in 2012. The total fund raising through public issues was about Rs 14,000 crore, including Rs 8,137 crore through FPOs.

Although there was a lull in the first half of 2012, the share sale activities bounced back towards the end of the year on the back of a slew of reform measures initiated by the government and SEBI to revive the stock market.

Interestingly, listed companies shunned the idea of garnering funds through the traditional methods of share sale like follow-on public offer (FPO) and opted for OFS route owing to volatility in the equity market.

Since its introduction by the market regulator, 20 Indian companies have already raised Rs 23,800 crore through the OFS route, the largest being Rs 12,666 crore issue by state-run oil producer ONGC in March, followed by NMDC stake sale in December yielding Rs 6,000 crore.

Others major OFSs include Reliance Power Rs 1,500 crore, Bluedart (Rs 950 crore), Hindustan Copper (Rs 808 crore), Wipro (Rs 750 crore), DB Corp (Rs 421 crore), Adani Power (Rs 193 crore) and Fresenius Kabi Oncology (Rs 114 crore).

All private listed firms are required to attain a minimum public shareholding of 25 percent by June 2013, while public sector units have more time, August 2013. Besides, the state- run listed firms are required to have at least 10 percent held by the public.

The rules have to be adhered to within this timeframe, failing which action will be taken by the market regulator.

After a lacklustre first-half, when nine firms raised a total of Rs 6,601 crore, the second-half saw the year's largest public issue (Rs 4,200 crore) by Bharti Infratel.

The tower company's IPO is the largest since Coal India's Rs 15,475 crore IPO in October 2010. Other major IPOs in 2012 included MCX's Rs 663 crore public issue, PC Jewellers (Rs 601 crore) and Care Ratings (Rs 540 crore).

Additionally, 12 companies hit the small and medium enterprises (SME) platforms of BSE and NSE to raise a total of Rs 92 crore through their IPOs in 2012.

However, a few companies including packaging materials maker Plastene India and auto parts manufacturer Samvardhana Motherson Finance shelved their IPO plans due to weak market.

Analyst said that IPO market have started showing signs of revival owing to reform measures being undertaken by the government and regulator SEBI and expect buoyancy in the secondary market in 2013 which would make markets attractive.

"Even in a buoyant market, the success factor for IPO/FPO continuous to be the strength of the company, the sector and the pricing of the issue. Enough lessons have been learnt by the IPO managers during 2012. We expect much more matured pricing of IPO/FPOs in 2013," Bandhopadhyay said.

SEBI has also announced various other IPO market reforms, steps for enhanced distribution network, incentives for brokers, bidding through electronic IPO platforms and allotment of a minimum lot of shares.