Analysts hopeful of primary market revival

The primary market seems to be fast gearing up to play ball with the bullish sentiment in the secondary market, which has been setting new records since the Modi-led BJP formed the Government.

According to a study by SMC Global, initial public offerings have been evaporating for the last three years, as the economic slowdown forced 109 companies to call off their plans to tap the capital market for raising ₹52,500 crore. These companies could not hit the market despite the approval of capital market regulator SEBI. Companies have to launch their IPOs within one year after receiving SEBI nod.

However, according to Vikram Dhawan, Director, Equentis Capital, investors’ appetite for initial public offering appears to be good after the recent sharp spike in the secondary market. However, he added, public offerings by large corporates in fund-starved sectors, such as infrastructure and banking, may not happen in a hurry.

“The present market rally is led by sentiments, but we have to wait for a clear policy signal from the Government before large corporate houses jump into the fray. It is the right time for mid- and small-cap companies to hit the market,” he added.

The positive sentiment in the capital market since the start of the year has, however, failed to revive the IPO market. Of the two IPOs which hit the market this year, only one managed to sail through. While Wonderla Holiday managed to raise ₹180 crore, Loha Ispaat had to withdraw its offer due to poor response.

In a sign of a turnaround, Delhi-based Tarini International, an infrastructure company, has now announced plans to raise ₹16 crore through an IPO. The company undertakes turnkey projects in power transmission and distribution and has identified a 5-MW hydro project in Karnataka. “We would like to now focus on the African continent, as it has abundant natural resources leading to extensive mining activities involving continuous need for power. The region being power deficient, there are tremendous opportunities for impending power infrastructure works,” said the company, in a statement.

Jagannadham Thunuguntla, Head of Research, SMC Global, said the ability of corporates to fund expansion projects would be hit if the slowdown in fund raising through IPOs continues any longer.

“It would also be interesting to look at the Government’s approach towards the disinvestment programme which was supposed to bring public issues of several blue-chip public sector undertakings,” he added.