Financial services group Anand Rathi said on Wednesday that it has shelved plans to list its wealth management arm on the stock exchanges owing to “difficult market conditions”.
The group said in a statement that it will explore an initial public offering (IPO) for Anand Rathi Wealth Management Services Ltd at a later stage as the primary markets are in a “wait and watch” mode.
It has filed an application through its merchant bankers -- Equirus Capital and Jefferies India -- with the Securities and Exchange Board of India (SEBI) to withdraw the IPO proposal.
“The business is doing extremely well and the company is witnessing unprecedented traction in its target markets,” said Anand Rathi Wealth’s managing director Amit Rathi. “However, a large part of the IPO proceeds were in nature of offer-for-sale by the holding company and in light of the difficult market conditions, the group has decided to pursue other avenues to raise the requisite funds.”
According to the draft papers, the IPO size was Rs 425 crore ($58.5 million then), comprising fresh issue of shares worth Rs 125 crore besides a secondary market sale of shares by the promoters worth Rs 300 crore.
Earlier this month, VCCircle had reported that SEBI had kept Anand Rathi Wealth’s IPO proposal in abeyance.
The company had highlighted certain regulatory matters as “risks” to its proposed offering at the time of filing the draft prospectus. In one such case, Anand Rathi said one of its group entities Anand Rathi Commodities Ltd was involved in a proceeding with SEBI in a case relating to a scam at National Spot Exchange Ltd. The settlement has yet to conclude.
“An adverse outcome in relation to the matters could result in, amongst other things, Anand Rathi Commodities ceasing to carry on its current business, the imprisonment of certain senior management of the Anand Rathi Group, including our Managing Director, Mr. Amit Rathi, who is also a part of our Promoter Group, and the imposition of penalties on ARCL,” the company stated in its DRHP.
Anand Rathi’s decision comes at the end of a year in which equity capital fundraising took a substantial hit as stock markets turned volatile, liquidity thinned and risk sentiment rose from domestic and global developments.
Local companies raised a total of Rs 91,915 crore (about $13 billion) in equity capital through the public markets this year. That’s a drop of 41.6% from 2017, a record year for equity capital markets owing to strong liquidity that had fuelled a stock market rally.
Activity in the final three months of 2018 has virtually come to a standstill due to global concerns on the trade war between the US and China and a liquidity crisis.
Earlier this month, the Bharatiya Janata Party (BJP) lost power in three big states. This has accentuated concerns about its prospects in the general elections next year. As a result, experts say primary market activity is unlikely to pick up pace until the elections and the poll results could determine if the IPO window opens again.
There is a long list of companies preparing to go public; as many as 71 companies have received regulatory approvals for IPOs in 2018. Last year, 46 IPO proposals had made the cut.
Another Mumbai-based financial advisory firm, ASK Investment Managers, is among those in queue.
ASK, which is backed by private equity giant Advent International, will become the first portfolio management services firm in India to list on the exchanges.
There are nearly a dozen firms listed in the broader broking and portfolio management services space including Motilal Oswal Financial Services, Emkay Global Financial Services, Edelweiss Financial Services, JM Financial, and IIFL Holdings.
All of these firms have recently seen a sharp decline in stock prices in the aftermath of the liquidity crunch in India’s non-banking financial companies (NBFCs).
Concerns arose after IL&FS defaulted on a series of its debt instruments, causing redemption pressure at other non-banking financial companies (NBFCs).
Anand Rathi Wealth
The company was originally incorporated as Hitkari Finvest Pvt. Ltd in March 1995, before undergoing name changes and eventually assuming its current avatar in July last year.
It caters to a large spectrum of clients through a mix of advisory, distribution and technology solutions.
Anand Rathi has clients across the mass affluent, high net worth individuals and ultra high net worth individuals categories.
Its total assets under administration stood at Rs 16,997 crore as of July this year.
The company operates under the Anand Rathi group which was established in 1994. The parent firm is a diversified financial services company engaged in stock broking, wealth management, investment banking and insurance broking.