Companies and financial institutions have mopped up close to Rs 64,429 crore in 2017 so far with the government raising Rs 9,193 crore through a share sale in power utility NTPC. The amount raised in 2017 is about 37% higher than the Rs 46,733 crore raised in 2016. Market participants say the fund raising through equities could cross `1 lakh crore by the end of the year.
Narayanan Sadanandan, executive VP, SBI Capital Markets, said adequate liquidity in the market and the desire of private equity players to exit their holdings have created action in the primary market. Moreover, the initial public offerings (IPOs) and offer for sales (OFS) by the government to meet its disinvestment target could take fundraising in 2017 to more than Rs 1 lakh crore. “There is adequate liquidity in the market, and if the market conditions continue to remain the same, then one lakh crore is a feasible target,” he said.
The fundraising has been helped by a booming stock market; the Sensex has gained 19.5% in the year so far. On Tuesday, the benchmark gauge closed at 31,809.55.The Nifty has put on 21.6% in 2017 closing Tuesday’s session at 9,952.20.
Since the beginning of the year, firms have mopped up rs 14,185 crore through initial public offerings (IPO), offers for sale (OFS), Qualified Institutional Placements (QIP), and rights issues, among others, data from Prime Database showed.
A significant portion – close to 46.94% – of the total equity raised this year has been by way of QIPs at Rs 34,181 crore. SBI’s Rs 15,000-crore offer has been the biggest in 2017 so far – the lender had issued around 52.21 crore new shares at a price of Rs 287.25. The issue was aimed at augmenting the bank’s capital adequacy ratio and for general corporate purposes.
This is the highest QIP issue in the past eleven years. Banks constituted 84% of the amount raised through QIPs. Market participants said the need for tier-1 capital and the necessity to meet Basel-III requirements are the reasons for banks opting for QIPs.
After QIPs, the maximum amount of money was raised through IPOs in 2017. In 2017, companies raised Rs 14,181 crore through IPOs. Listing gains and returns by newly-listed companies as also the positive sentiment in the broader market are among the reasons attributed to the trend. BSE, HUDCO, CDSL, Avenue Supermarts, Shankara Building Products, S Chand and Co, and Cochin Shipyard are some of the companies which completed their IPOs in the last eight months.
By Sundar Sethuraman