In the last five years or so, the number of initial public offers that lapsed or were withdrawn exceeded the number that hit the market.

The reasons were many. These included no SEBI clearance for companies saddled with poor fundamentals, market uncertainty, promoters not getting the ‘right’ valuations and lack of investor appetite.

According to Prime Database, 134 IPOs collectively raised Rs 71,140 crore from April 2009 till November this year. In comparison, 150 companies that had filed offer documents with the market regulator during this period to collectively raise Rs 71,279 crore via IPOs and FPOs, either allowed their offers to lapse or withdrew them.

Significantly, despite the one-year window to float an IPO, these companies chose not to enter the market.

“Of this five-year trend, the worst was 2013, making it a forgettable year for IPOs. Lack of investor appetite was most pronounced in the infrastructure sector, especially power, telecom and real estate.

“In addition, the lack of aggression on the part of the Government for its disinvestment programme, also adversely affected the IPO market because if investors had got a chance to make money in Government issues then their risk appetite would have been greater,” said Prithvi Haldea, Chairman, Prime Database.

The downward trend in the IPO market has led to companies raising capital from other sources. In some cases, the tight situation saw the companies cancelling or deferring their expansion plans.

According to market experts, the key factor that could revive the primary market, would be quality issues at the right price.

Janganadham Thunuguntla, Strategist & Head of Research SMC Global Securities, said: “The shape of the Government’s disinvestment programme in the remaining three months of this fiscal will also determine the timing and success of the primary market’s renewal.

“Primary market revival usually comes six months after the revival of the secondary market. Though the secondary market started to show signs of a pick up four to five months back after the new RBI Governor took charge and the US Fed hinted at a postponement of its tapering policy, it is still trying to catch up,” he added.

Looking ahead e-commerce firms and micro-finance institutions are likely to dominate the IPO market.

Ashutosh Maheshwari, CEO, Motilal Oswal Investment Advisors, said: “Though there is capital available and resurgence of demand, but there is a mismatch between which issues need capital and where capital is going finally. This is because the operational and financial performance of most corporates has been bad this year.”

“Unlike sectors like IT, cement and pharma, which are crowded with 30-40 listed players, offering investors the choice to buy in the secondary market itself, sectors like e-commerce and microfinance institutions offer no listed avenues to pump in money and hence offer attractive investor interest.

“So, if there are issues in this new creative and innovative space then they would be lapped up. Currently e-commerce is mostly being funded through private equity, leaving the IPO route untapped,” he added.

According to Prime Database, there are 1,171 companies wanting to tap the market to raise Rs 4.65 lakh crore but are yet to file their offer documents.

“So, undoubtedly the need for capital is huge. We don’t see the IPO market reviving before the second half of next year where there is expectation of a more sustained and wide rally in the secondary market on the back of a general improvement in macro fundamentals of the economy and a change in leadership,” added Haldea.

> manisha.jha@thehindu.co.in

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