Public issues to raise funds by Indian firms have taken a big knock. That is no surprise given the state of the markets. According to a VC Circle analysis of data compiled by Delhi-based research firm Prime Database, the total funds raised by firms through either initial public offer (IPO) or follow-on public offers (FPO) have dropped sharply to a mere Rs 1,547 crore from Rs 23,653 crore during Q1 of FY’08. The financial year 2007-08 was a peak year for raising funds with Rs 53,219 crore raised through IPOs and FPOs alone (including various instruments- equity, convertibles and debt).
In fact, the first quarter this year with 13 issues was the slowest since Q1 of FY’04 when there was only one issue which raised Rs 993 crore. But it was boomtime in Q1 last year as far as the number of issues are concerned with 23 IPO & FPOs, while the average number of issues in first quarters for all previous years were less than 15.
If 13 issues had raised only Rs 1,500-odd crore in Q1 this year, it means the firms are still going public, but they are limiting the IPO equity float (partly explained by pre-IPO placements which has caught on over the last 2-3 years). Another interesting aspect is that of FPOs. No company came up with an FPO this year as against two firms who raised Rs 10,570 crore last year during the same time. In fact, it is the first year since 2003-04 when the first quarter did not see any FPO in India.
Moving beyond IPOs & FPOs, there is however a relatively better scenario for rights issues through which firms raise additional capital from their existing shareholders. While the number of rights issues have been limited with just 2 issues in first quarter, the quantum of funds raised through rights issue has shot up to a recent high of Rs 438 crore against an average of Rs 200-350 during the first quarter of the last three years.
It is not just domestic market where firms have been cautious in raising funds. The data for overseas issues which is available on a calendar year basis, shows that in the first half of this year just 22 overseas issues scooped up Rs 3,956 crore as against Rs 97,700 crore raised through 115 issues in the whole of 2007.
Another major indicator of corporate fund raising activity is private placements of bonds and debentures. This again shows a rather sorry picture for the first quarter of this year. Firms raised Rs 14,095 crore through 76 such placements during Q1 this year as against Rs 24,964 crore raised through 147 placements in FY’08.