IPO Market 2020 Remains Muted, Know Why Companies Are Not Tapping The Market

At a time when companies with large and strong records are not entering the market, it is risky for small companies to raise money through an IPO, and the IPO market will bounce back once the current pandemic is over.

IPO (Representational Image)

Mumbai: The outbreak of coronavirus has hit the economies globally as most companies are yet not back on their feet. Even as companies are in dire need of capital the initial public offering in the market remains bleak. Also Read: Yes Bank Fraud Case: Blow To CBI As Court Dismisses Chargesheet To Prosecute Rana Kapoor In Absence Of Sanction An IPO is the first offer made to the public for the subscription of shares by a company.  As of now, only two IPOs have taken place this calendar year which includes the IPO of SBI Card and Payment Services in BSE and NSE, followed by Rosari Biotech.   The Rs 496-crore IPO by Rossari Biotech on Wednesday attracted 79.37 times bids on Day 3 of the bidding process. In H1 2020, Indian companies managed to raise ₹1.04 trillion from the capital market, according to Prime Database, helped largely by Reliance Industries ₹53,125 crore rights issue. Last year, companies raised ₹81,052.72 crores during the same period while ₹45,233.41 crores were raised during July-December 2019, as per the business daily Mint report. However, in the latest announcement of IPO, Mindspace Business Parks REIT, owned by K Raheja group and Blackstone, has filed its final offer document to launch a ₹4,500 crore. This is the second public issue of Real Estate Investment Trust (REIT) in India. The IPO market of micro, small, and medium enterprises (MSMEs) remained bleak. So far this year, IPOs of 17 MSMEs have come and only Rs 115 crore has been raised. In 2019, around 51 IPOs came up which lapped Rs 750 crore. There is ample liquidity in the market and money is coming from foreign portfolio investments. But companies have been reluctant to enter the IPO market.  Find out why? It is an unprecedented situation ever witnessed in the history that has battered economies and brought them at a difficult juncture. In fact, experts opine that when the market fluctuates and investor sentiment falls, it is natural for the IPO market to remain sluggish. The same thing happened between September 2008 and June 2009, when only three companies entered the IPO market. That period has witnessed the recession arising from the sub-prime crisis. ALSO READ|After Former Banker MD Romesh Sobti, Industrialist Anurag Jain Buys Property Worth Rs 100 Crore In Mumbai Experts believe that at a time when companies with large and strong records are not entering the market, it is risky for small companies to raise money through an IPO. It is said the primary market reflects the position of the secondary market. Therefore, without improvement in the secondary market, the IPO market will not flourish. They believe that after the vaccination enters the market for Covid-19, it is only then that the economy may reopen fully and may lead to IPOs. It is expected companies that are heavily impacted due to coronavirus infection won’t move ahead with their offerings.  Companies that want to be listed in the market may have to wait a little longer.