Public sector banks and enterprises dominated public equity market in 2010-11

02 Apr 2011

1
Public sector banks and other PSUs dominated the public equity issues segment in financial year 2010-11 in India, accounting for 60 per cent of the total of Rs.46,267 crore raised through such issues.
 
According to figures compiled by Prime, the country's leading database on the primary capital market, of the total Rs.27,537 crore raised by PSU banks and PSUs, Rs.22,763 crore was through divestments and the remaining through the issue of fresh capital.
 
Prithvi Haldea, who heads Prime, said though 2010-11 was expected to do much better in terms of IPOs, the mobilisation was marginally lower than the Rs.46,941 crore raised in the preceding fiscal. ''The mobilisation in the year could have been higher but for the deferment of some large PSU offerings and the continuing volatility in the secondary market, especially in the last quarter of the year,'' said Haldea.
 
Compared to Rs29,514 crore raised in the third quarter of the fiscal, the last quarter saw mobilisation of only Rs. 4,468 crore. The highest amount that had ever been raised through public issues was in 2007-08, when the mobilisation amounted to Rs.52,219 crore.
 
Even for PSUs and state-owned banks, fiscal 2011 was not a record year; during 2009-10, they had raised Rs.31,082 crore through public issues.
 
Seven PSUs entered the market in the financial year that ended on March 31, led by the largest-ever IPO in India, that of Coal India, for Rs.15,199 crore. The other PSU IPOs included Manganese Ore India Ltd, (Rs.1,238 crore), Satluj Jal Vidyut Nigam (Rs.1,063 core) and Punjab & Sind Bank (Rs.471 crore). There were three follow-on public offers (FPOs) as well: Power Grid Corporation (Rs.7,442 crore), Shipping Corporation of India (Rs.1,165 crore) and Engineers India (Rs.960 crore).
 
During the year, there were 57 public issues, as compared to 44 in the preceding year – 52 IPOs and five FPOs.
 
The average deal size, however, fell to Rs.811 crore from Rs.1,067 crore in fiscal 2009-10. There were 10 issues of above Rs.1,000 crore, but only six of less than Rs.50 crore. The market for small companies was non-existent, as there were no issues below Rs.10 crore.
 
According to Prime, only 45 per cent (Rs. 21,065 crore) was raised through fresh capital, which typically goes into creation of productive assets, with the remaining Rs.25,201 crore raised through offers for sale where the proceeds go to the sellers - government, promoters, venture funds and other investors, but not to the company.
 
In terms of method of offering, 55 of the 57 issues of the year were through the book-building route, cornering over 99 per cent of the amount, with only two small issues through the fixed price method.
 
The facility of anchor investors was used by 21 companies, who on the whole allocated 30 per cent of the amount reserved for the qualified institutional buyers (QIBs).

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