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The tough market conditions in the past 18 months forced promoters of 55 IPOs to either let SEBI permission expire or call off issues mid-way due to poor investor response, resulting in about Rs 50,000 crore of equity mobilisation evaporating into thin air.
Mr Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities Ltd, said so far this year 22 IPOs, worth around Rs 8,392 crore, had been called off.
Some of the big names who have called off their IPOs include Reid &Taylor, Tata Autocomp, Micromax, Embassy Property, Joyalukkas, VRL Logistics and Lokmat Media.
He estimated that the 51 IPOs that were called off since January 1, 2011, were estimated to raise about Rs 48,500 crore from the market. These companies had valid IPO approval from SEBI which they allowed to lapse.
Mr Thunuguntla said during the past 18 months, four issuers had withdrawn their IPOs, worth about Rs 2,000 crore, after launching them due to poor investor response. With the disinvestment programme, too, coming a cropper, the total mobilisation that could not be made should be much higher.
Answering a question from Business Line as to whether the practice of issue of IPOs at par has vanished, Mr Thunuguntla said the IPO pricing approach and guidelines had gone through significant change in the past two decades.
During the era of Controller of Capital Issues, the pricing of IPOs was "driven by the defined guidelines and everyone has to comply with those guidelines". But after SEBI came into existence, the IPO pricing has been as per ‘free pricing’ guidelines and pricing came to be fixed by the managements in consultation with merchant bankers taking into account the demand.
He felt that the "health of the primary markets is dependent on the secondary markets" and as long as the secondary markets did not recover, it was "very difficult to expect" primary markets would recover fully. He said during such uncertain times, it was for the Government to take the lead with quality PSU public issues that were priced reasonably "giving an opportunity for the investors to make money".
He felt that this would have a spillover effect on the overall market sentiments, enabling more IPOs to hit the market. It’s high time the government sets the "tone for primary markets", he added.
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