Public offers seem to have gone out of favour with Indian companies, which raised over Rs. 11,000 crore (Rs. 110 billion) through IPOs and FPOs in the first six months of 2011, just one-third of the year-ago levels.
A total of 34 companies raised Rs. 34,150 crore (Rs. 341.5 billion) through initial and follow-on public offers in the first six months of 2010, while 22 companies together raised Rs. 11,421 crore (Rs. 114.21 billion) between January and June this year.
In the whole of 2010, companies raised Rs. 71,114 crore (Rs. 711.14 billion) through 70 public issues.
The waning appetite of investors for new issues has also prompted many firms, including some big names like Reliance Infratel and JSW Energy, to postpone their listing plans.
Market analysts believe the investor sentiment in the country is being affected by successive interest rate hikes meant to tame soaring food prices, coupled with a slew of recent scandals such as irregularities in 2G spectrum allocation.
"There is a negative sentiment among investors due to various factors such as inflation and high interest rate prevailing in the country," Religare Securities Vice-President Rajesh Jain said.
The year 2011 featured 22 public issues, that is, 20 IPOs and two FPOs. A major chunk of the amount raised through share sales - that is, Rs. 8,055 crore (Rs. 80.55 billion) - came from follow-on public offers and the remaining Rs. 3,317 crore (Rs. 33.17 billion) from IPOs.
In the FPO segment, Power Finance Corp garnered
Rs. 4,578 crore (Rs. 45.78 billion), while Tata Steel raised Rs. 3,477 crore (Rs. 34.77 billion).
Gold financing firm Muthoot Finance conducted the biggest IPO during the period, through which it raised Rs. 901 crore (Rs. 9 billion), while PTC India Financial Services' IPO raked in Rs. 439 crore (Rs. 4.39 billion).
The response from all classes of investors was tepid and many public offers fail to attract any funds from qualified institutional investors.
Meanwhile, the 30-share Sensex fell eight per cent during the first half of the year.
Interestingly, 15 companies, including Anil Ambani Group firms Reliance Infratel and Jindal Power, have refrained from bringing out their IPOs so far this year despite obtaining the go-ahead from market regulator Sebi.
The list of 15 companies mostly comprises entities from the real estate and power sectors. These IPOs were planned with the objective of raising about Rs. 25,186 crore (Rs. 251.86 billion) in total.
"As the first half of 2011 has seen missing FII inflows, resulting in lukewarm market sentiment, it is surely taking a toll on the IPO market," SMC Global Securities Strategist and Head of Research Jagannadham Thunuguntla said.
Looking ahead, there is likely to be a dip in the number of public offers in 2011 vis-a-vis 2010 because of the uncertain global economic situation.
"We will not see any improvement in the public issues in the next six months because of subdued market conditions, as well as uncertainty in the global economy," Jain said.
So far, around 16 companies have filed a draft prospectus with Sebi for IPOs or FPOs in the current fiscal.