The IPO market is down in the dumps. While many companies who have got a nod to float an IPO from market regulator Sebi have been forced to allow their approvals to lapse, several others are shelving their plans for a public issue altogether. The development may prop up private placement market, but not all companies will be able to raise capital and private equity investors are very choosy on whom they will bet on this tight market.
According to market research firm Prime Database, as of October 17, as many as 28 companies who had planned to raise Rs 19,463.91 crore together, have let their IPO approvals to lapse. Given the poor state of stocks markets the numbers would have only grown from that level as on date.
The IPO approvals are given on the basis of information filed with the application documents. These include details of financial statements which are provided by the company looking to float a public issue.
According to the norms, the companies need to provide latest financials so that prospective investors have a view of recent operating performance of the company. However, there is a cut off point for disclosing the last financial results as approvals take time. If the company does not go for the IPO within the time period, it has to file fresh application as the financial results exceed the cut off point.
Among those who have let their approvals to expire and thereby automatically postponed their IPOs include Reliance Infratel (Rs 6,000 crore~$1.2 billion), Jaiprakash Power Ventures (Rs 4,000 crore~$800 million), UTI Asset Management (Rs 2,000 crore~$400 million), Acme Telepower (Rs 1,200 crore~$240 million), Mahindra Holidays & Resorts (Rs 1,000 crore~$200 million) and MCX (Rs 600 crore~$120 million).
Some of these firms have also seen their private equity investors who struck a pre IPO deal as in the case of Acme Telepower, pressing exit button as the IPO gets delayed.
Among others, ICICI Venture and New York Life Investment and Management Fund-backed biotech firm Avesthagen has also decided to look at alternative routes to raise funds after filing its red herring prospectus with Sebi. According to The Economic Times, the Bangalore-based company is now looking to raise around $30-50 million through private placement to meet immediate requirements to launch the current line-up of products.