The volatility in the stock market due to concerns related to continuing high inflation and tentative global economic headwinds has also taken a toll on the Indian primary market with a slew of companies, big and small, deciding not to go ahead with their public issues, fearing investor response.
Companies such as Jindal Power, Reliance Infratel, Gujarat State Petroleum Corporation, Sterlite Energy, Lodha Developers, BPTP, Ambiance, Glenmark Generics, etc., have curved their way from IPO this year.
Firms have a window of one year after they get clearance from the market regulator to float their public issues. However, once they cross the period, they need to file afresh for approval.
Reliance Infratel was the first company who crossed the validity period given by the market regulator on January 11 this year and could not go ahead with its Rs 5,000 crore IPO, according to data compiled by brokerage firm SMC Global.
The firms who have crossed the one-year window primarily include names from the real estate and power sectors. While the power sector has been struck with higher input price of coal and lower price of merchant power, the spectre of demand slowdown due to rising interest rates and anticipated price correction hangs over the realty space.
The pipeline includes a much-delayed $360 million offering by India JV of Dubai’s Emaar Properties, Lodha Developers’ $600 million offer, Sahara Prime City’s $600 million and Embassy Property’s $515 million issue.
“Real estate is completely out of favour of the market. And Power has also become out of favour of the market because of the fact that several IPOs from the power industry in the past have given dismal returns to the investors,” said Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities Ltd.
“As the first half of 2011 has seen missing FII inflows, resulting in lukewarm market sentiment, it is surely taking a toll on the IPO market,” he added.
Source: SMC Global Securities Limited