Despite soaring stock market, IPOs Losing Ground
The Indian stock markets has been on a dream Bull Run cycle with both the Sensex and Nifty50 reaching their record highs. Such has been the positive impetus of the Indian stock markets that the Bombay Stock Exchange or BSE has been one of the best performing global indexes in recent times. Amid all the green figures, rising stocks and trader interest in the markets, the number of companies seeking an Initial Public Offering or IPO remains low. Even companies is desperate need for capital for their business expansions are biding their time and not entering the capital markets in this positive cycle. While business analysts are of the opinion that it is not wise to trace such a trend and sooner or later companies seeking funds would come out with their IPOs, financial experts believe that companies are having higher expectations from the market which may be stopping them for filling IPOs.
Financial markets experts trace the trend to the formation of a stable NDA government considered to be a pro reform and pro business. The stock markets have been on a Bull Run ever since the new government has been in place with Sensex valuations rising to as much as 16 times its forward year earnings. In such a scenario, companies are expecting way too much capital from the markets. As of now only 13 companies are listed with SEBI ready to file an IPO which experts feel is a dismal figure considering the market high surge. The rise in popularity of raising capital through the private equity funding route is considered to be one of the reasons for the lack in IPO interest. Recently e-commerce majors like Flipkart and Snapdeal have inked substantial private equity funding.
The markets are generally in the right mood to embrace even the novel companies and their high promoter’s demand given they have a strong earnings growth over a period of time. Some of the recent listing like Snowman which subscribed 60 times, and Sharda Cropchem which subscribed 59 times the offer price are obvious examples.
Coffee retail chain Cafe Coffee Day, and aviation company Indigo are however some of the well known names which are getting ready for a billion plus listing translating the optimism of the financial markets. The fringe players and the lesser known names are seeking valuation way too much from their forward earnings due to the positive mood in the financial sector. As a result half of the companies that listed their IPO are now re-filing them since they could not sell shares earlier at the higher price.
Bombay Stock Exchange, BSE, Indian stock markets, Initial Public Offering, NDA government, Nifty50, private equity funding, SEBI, Sensex
