Modi Government's 1 Year: 32 Firms Approach Sebi With IPO Proposals
New Delhi: Looking to tap into the upbeat investor sentiment, as many as 32 companies, including Lavasa and UFO Moviez, have filed draft IPO or initial public offering papers with the Securities and Exchange Board of India (Sebi) in the first year of the Narendra Modi government.
Companies are expected to continue to file IPO papers in the coming months as the overall sentiment in the market is positive for equity issuances, experts said.
Since the Modi government took charge on May 26, 2014, 32 companies have filed the draft red herring prospectuses with capital market regulator Sebi for launching IPOs.
In the previous 12 months, only 13 companies had approached Sebi with IPO proposals.
"After the change of the government at the Centre in May last year, there has been a significant change in sentiment and outlook towards India, which has prompted companies to file IPO papers," Quantum MF head equity funds Atul Kumar said.
Most of the companies plan to utilise IPO proceeds for capacity expansion as well as working capital requirements.
ICICI Securities executive director Ajay Saraf said, "Though overall sentiment in market is positive for equity issuances, we believe companies with strong fundamentals and right valuation will only be able to tap the capital markets."
Of the current 32 proposals, Sebi has given approval to 20 firms, while 11 firms already have hit the capital markets during the period. However, four companies - Videocon D2H, Emcure pharmaceuticals, CL Educate and MM Auto - have pulled out their draft documents.
The regulator has already given nod to the IPOs of Lavasa Corporation, RINL, Navkar Corporation, Sadbhav Infrastructure Project, SMC Global Securities, ACB (India), Shree Pushkar chemicals and fertilisers. However, these companies are yet to launch their public offers.
A majority of the companies which have approached Sebi are mid-sized, looking to mop up between Rs 200 crore to 1,500 crore.
"With the pick-up in growth aided by consumption demand, focus on Make in India and investment in infra sector, firms will require incremental equity investment. This equity investment will not only be funded by internal accruals, but will also require public investment," Mr Saraf said.
"So, even though large corporates till now could have funded growth through internal accruals, sooner or later they will have to raise capital from public markets to fund the high growth in business and economy," he added.
Equirus Capital vice president Munish Aggarwal said that after the second quarter of 2016, corporate earnings will start improving which will propel the IPO activity.
"Investors remain interested in differentiated stories and if positioned, marketed and priced correctly, are willing to back new companies coming to market," he added.
The Sensex has surged over 11 per cent since the new government took charge. It had hit a record high of over 30,000 points earlier this year, but has corrected since then to 27,828.44 points.
