Even though the Dalal Street has uncorked champagne to celebrate the record Rs 71,500-crore IPOs so far in 2017-18, domestic brokerage HDFC Securities feels that it could have been Rs 1 lakh crore had it not been for the low/nil capex and very few offer-for-sale issues by promoters.

Setting a record, as much Rs 71,500 crore have been raised from initial public offers (IPOs) by 122 companies so far in the current fiscal, with insurance companies accounting for almost 60 per cent of the total in terms of value. Of the total amount raised, close to Rs 52,000 crore were raised between September and November 2017 alone. In comparison, Rs 29,000 crore were raised through initial share sale in 2016-17 and Rs 15,000 crore in 2015-16.

“Given that we had seen Rs 52,300 crore raised from initial public offers/follow-on-public offers in FY08 (the previous record), if we inflate the number by 6.5 per cent to adjust for annul inflation, then we should have raised Rs 98,000 crore this fiscal year,” HDFC Securities Managing Director and Chief Executive Dhiraj Relli told PTI.

As per the brokerage, FY08 market size represented 2 per cent of GDP. Though the amount raised so far in 2017-18 stands at Rs 71,500 crore, this is a record-breaking number for IPOs, it amounts to only 1 per cent of GDP, reflecting (on relative basis) that the IPO market have not hit its peak.

And he blames this on the poor or almost no demand for capital by large companies for greenfield or brownfield expansion as they are saddled with excess capacity or poor demand.

“A robust market requires large need for capex or need for promoters to list their shares due to pressure from private equity investors or raising liquidity in the hands of promoters.

“Low current capacity utilisation, stringent credit evaluation by lenders for fresh loans are some challenges faced for IPO markets to flourish more,” Relli said.

Relli feels that next fiscal could do an encore or even better than the current year’s levels, if the equity markets remain supportive and government lays down an aggressive divestment target for 2018-19. “The performance of companies, which got listed in recent years, will also determine the future course for IPOs,” he added.

Public sector railway stocks, defence units in the government sector, chemicals, logistics, airports, hotels, non-banking finance companies are some sectors from where one can expect primary market action next fiscal year.

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