25 IPO's pulls out the plug due to the sluggish markets

November 29, 2011   ·   0 Comments

www.stockssavvy.comOwing to a sluggish trend in the stock market, at least 25 companies have called off their initial public offer (IPO) plans so far in 2011.  Mostly from the real estate and power sectors, these 25 IPOs were together estimated to raise about Rs31,000 crore worth capital to fund the companies’ business expansion plans.  Even after getting approval from market regulator Securities and Exchange Board of India (SEBI), these companies could not launch their IPOs within the valid period of one year from the date of approval, mainly on account of the ongoing turmoil in the capital markets

The BSE benchmark Sensex has lost more than 23% since the beginning of 2011 and hit its 52-week low of 15,478.69 on 23 November 2011.

“The bad mood of capital markets has led 25 companies to call off their IPOs during the 2011 calendar year. The probable amount that these companies were planning to raise was to an aggregate of Rs31,000 crore,” brokerage firm SMC Global Securities said in a report.

.These 25 companies having cancelled their IPOs included a host of the real estate players, such as Lodha Developers, Ambiance Real Estate, Kumar Urban Developers, Neptune Developers, BPTP, Raheja Universal and Lavasa Corporation. Besides, a number of power sector companies, such as Sterlite Energy, Jindal Power, Avantha Power and Ind Bharat Power Infra, have also called off their IPO plans. Also, the government’s disinvestment programme to bring public issues of several blue-chip PSUs couldn’t take off.

Besides, a few companies such as Micromax have already announced IPO deferrals even though approval for SEBI validity still remains. There are at least 10 companies who have valid approval from the market watchdog and are left with just two months in their validity period of one year from the date of SEBI approval like Pride Hotels, Tara Jewels.

SMC said that the cancellation of IPOs could impact the companies’ ability to raise capital to finance their expansion projects, which could eventually result in a slowdown in capacity building and job creation. It also noted that the trend in the IPO market may lead to panic in the minds of the private equity (PE) funds, as they would be unable to exit from their investments. The PE funds generally invest in unlisted companies in the hope of a later exit through IPOs.

Reference: Moneylife

Rajesh Singla

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