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Equity fundraising activity in India shrank this year even as it expanded globally. So far in 2023, funds raised through equity capital markets (ECM) stood at $7.7 billion, a 15 per cent decline from the same period last year. By comparison, global ECM mobilisation stood at $234.8 billion, a 19 per cent gain, shows data provided by Refinitiv.ECM activity comprises of all kinds of equity fund raise, such as initial public offerings (IPOs), follow-on share sales and block trades.
The funds raised through IPOs so far this year stood at $0.9 billion, a decline of 83 per cent. Fundraising through IPOs declined globally as well this year to $48.2 billion, down 26 per cent over the same period last year.About $6.8 billion was raised through follow-on offers, a 74 per cent gain from the same period the previous year. Globally, it stood at $145.8 billion, a 37 per cent rise when compared to the corresponding period last year.
Bankers see a tumultuous Indian market as the reason for the decline in IPO activity. The Indian markets corrected nearly 10 per cent between December and March due to a combination of various factors — rate hike fears, short-seller Hindenburg’s report alleging irregularities in the Adani Group and the banking crisis in the US. As a result, the equity markets were volatile and issuers were circumspect about raising funds.A mismatch between pricing aspirations by promoters and the valuations investors sought also stalled listing plans of some companies during the first half, said investment bankers.
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They pointed out that a company going public is a significant milestone for it and the promoters would want market conditions to be propitious when they launch an IPO. Many companies prefer to wait for the right market conditions to launch their deals.”I would blame pricing for the tepid activity in the Indian markets. This is a market for correct pricing and good stories. Good stories will have takers, even if it is marginally expensive. Still, companies with no clear path to profitability will find it difficult to raise funds in this market,” said GS Ganesh, founder of Inga Ventures.
On follow-up fundraises, bankers explained that the spurt was due to the redemption by private equity (PE) players and promoters.”A lot of the follow-ons were block deals; there is no fundraising as such in such deals. Moreover, price discovery has happened on the exchange. Many of them are available at attractive valuations,” said Pranjal Srivastava, partner-ECM, Centrum Capital.
The domestic markets have rebounded sharply from their 2023 lows and are currently close to topping their lifetime highs made on December 1, 2022. However, the primary markets are still not reflective of the exuberance seen in the secondary market.
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