Primary market activity is unlikely to revive at least until the outcome of the general elections, according to a domestic brokerage. The comments come a day after capital markets regulator Sebi expressed concerns over the sluggish IPO activity, despite it already clearing over Rs 60,000 crore worth of issues.
"There will be very few IPOs in the first half of 2019, maybe only two," head for equity capital markets at Kotak Investment Banking, V Jayasankar said here Wednesday. S Ramesh, managing director and chief executive, said once the election results are out and normalcy returns, we can see some activity. Apart from the elections, the only factor that will have a bearing on IPO issuances is crude prices, Ramesh added.
Companies in need of capital will look at alternative routes like private equity to raise funds, while those looking to do an IPO for strategic reasons will wait and watch. Ramesh attributed the sluggish activity to choppy markets, saying such times are generally not so favourable for money raising and companies do not look at indices levels alone while raising money.
On Sebi chief Ajay Tyagi's suggestion to i-bankers to do more to make deals happen and getting the pricing right, Ramesh said there is a price mismatch between what the issuer expects and what the investor is willing to pay.
He, however, said the company will take the suggestion very seriously and work at ways to revive activity. Ramesh said the next year will see a revival from reality and infrastructure companies in money raising, and added the former can also look at REIT issuances in which global funds and mutual funds will be interested.
The high interest shown by domestic mutual funds in recent deals has been "surprising" for the company, he said. The company estimates the overall deal value, including mergers and acquisitions, private equity and equity capital markets at USD 110 billion in 2018, which is a 10 per cent growth over the previous years. The fee pool, however, has dipped to USD 600 million from USD 700 million in 2017, and Ramesh is confident that it will touch USD 1 billion over the next three years.
(With inputs from agencies.)