Nearly Rs 1.8 lakh crore was raised during the year through a combination of initial public offerings (IPOs), qualified institutional placements (QIPs), offers for sale (OFSs) and follow-on public offerings (FPOs), data published by Prime Database showed. The year’s figure is higher than the Rs 1.6 lakh crore raised in 2017 and more than double the Rs 82,241-crore amount for 2019.
According to Pranav Haldea, MD, Prime Database Group, contrary to the despondency witnessed due to the pandemic, 15 mainboard IPOs came to the market. These collectively raised a little over Rs 26,600 crore — more than double the Rs 12,362 crore raised through 16 IPOs in 2019. Strong retail participation in the IPOs, huge listing gains and highest-ever amount raised through QIPs and InvITs/ReITs were the other key highlights of the year, Haldea said.
Top merchant bankers said that the fund-raisings during the year could be divided into two distinct parts. First till August, when companies mostly took the secondary offering route. Then several IPOs hit the market since September, starting with Happiest Minds Technologies. Between March and August, only one IPO — by Rossari Biotech — was closed successfully.
Soon after the pandemic set in, swift actions by governments and central banks to pump in a record amount of liquidity at ultra-low interest rates gave investors the confidence to buy into risky assets, including equities. “Capital markets rebounded faster than anticipated after the outbreak of the pandemic. Leading corporates like Reliance Industries, HDFC, ICICI Bank, Kotak Bank and Axis Bank, among others, were in the forefront raising large sized follow-on equity,” V Jayasankar, senior executive director & head of equity capital markets, Kotak Mahindra Capital, said.
Top industry executives also said that the current trend of companies raising money through IPOs would continue in 2021. “A combination of good liquidity, issuances by several quality companies with strong management track record and good business models makes the IPO pipeline for 2021 a robust one,” Jayasankar said.“Promoters, large shareholders and private equity investors too monetised their holdings through large block sales and OFS. IPO launches picked up momentum from August. Investors benefited significantly from the strong listing gains, ending a great equity fund-raise for the year.”
On the other side, during the initial months of the pandemic, companies also recognised the looming uncertainty and “moved rapidly to raise defensive capital with differing objectives — deleveraging capital, insurance capital, confidence capital, opportunistic capital — to deal with near-term uncertainty,” said Ravi Kapoor, head of corporate & investment banking, Citi India. “Investors, driven by healthy liquidity, attractive valuations relative to the long-term outlook, have been highly supportive of capital-raising by high-quality companies, which are likely to create significant opportunities from this crisis.”