2. Primary Market. 2.1 Introduction. 2.2 Primary Market Issuances ( ) Corporate Securities

Transcription

1 ISMR Primary Market Primary Market 2.1 Introduction The primary market is an important part of capital market where a company floats securities for subscription by the public and receives cash proceeds from the sale. This enables corporates, public sector institutions as well as the government to raise capital which are then used to fund operations or expand the business. In addition, the primary market also provides an exit opportunity to private equity and venture capitalists by allowing them to off-load their stake to the public. When a security is offered for sale for the first time, it is known as Initial Public Offering (IPO). It is only after an IPO that a security becomes listed and available for trading in the secondary market of the stock exchange platform. The securities can be issued either through public issues or through private placement (which involves issuance of securities to a relatively small number of select investors). The price at which the security is issued is decided through the book building mechanism; in the case of oversubscription, the shares are allotted on a pro-rata basis. In addition to conduct an IPO, the company has other options to raise capital: When securities are offered exclusively to the existing shareholders of a company, as opposed to the general public, it is known as Rights Issue. A listed company can issue equity shares (as well as fully and partially convertible debentures, which can later be converted into equity shares) to a Qualified Institutional Buyer (QIB). This is termed as Qualified Institutional Placement. Companies can also raise capital in the international market through the issuance of American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and also by way of External Commercial Borrowings (ECBs). 2.2 Primary Market Issuances ( ) Table 2 1 provides statistics on the resources mobilized by corporates and the government from domestic as well as international markets. It can be noted from the table that, total resources mobilized through issuance of securities by corporates and the government in increased marginally by 19% year-on-year to Rs 18,440 billion (US $ 282 billion) Corporate Securities Resource mobilization by corporates in the primary market increased by 42% from Rs 5,179 billion (US $ 79 billion) in to Rs 7,375 billion (US $ 113 billion) in Capital raising via public issues and private placement witnessed strong growth; capital raised through the private placement route increased by 43% to Rs 7,050 billion (US $108 billion) while public issues also witnessed a sharp upsurge by 36% to Rs 325 billion (US $ 5 billion) (Table 2-1).

2 33 Primary Market ISMR Table 2 1: Resource Mobilization by Government and Corporate Sector Issues (Rs bn.) (Rs bn.) (USD bn.) (USD bn.) Growth in Growth in Corporate Securities 5,179 7, % 42% Domestic Issues 5,179 7, % 42% Public Issues % 36% Private Placement 4,939 7, % 43% Euro Issues Government Securities 10,336 11, % 7% Central Government # 7,390 7, % -2% State Governments 2,946 3, % 30% Total 15,515 18, % 19% Source: RBI, Prime Database; # only includes amount raised through dated securities Public and Rights Issues In , resources mobilized via public issue increased significantly in comparison to the previous year. In particular, the capital raised from public and rights issues increased by 7% to Rs 621 billion (US $ 9.5 billion). IPOs witnessed phenomenal growth of 97% from Rs 148 billion (US $ 2.2 billion) in to Rs 291 billion (US $ 4.5 billion) in Also, total number of IPOs saw a significant rise in as compared to the preceding year; public issues surged from 74 in to 106 in (Table 2.2). In contrast, the number of public issues in the debt segment declined from 20 in to 16 in Thus, the associated amount of resources mobilized witnessed a decline by 13% in from Rs 338 billion in to Rs 295 billion in The mobilization of resources through right issues also recorded a massive decline of 63% from Rs 92 billion (US $ 1.4 billion) in to Rs 34 billion (US $ 0.5 billion) in In , the number of companies using the rights route to raise capital was 12 (as against 13 in the previous year). Table 2 2 Resource Mobilization from Public and Rights Issues Public and Rights Issues Public Issues (i) +(ii) i. Public Issues Public Issues (IPO) Public Issues (FPO) ii. Public Issues (Bond/NCD) Rights Issues Total (1+2) Source: SEBI- Annual Report Sector-wise resource mobilisation During , the private issuers raised Rs billion through public and rights issues which is about 128% rise over the previous year. They issued 133 public/right issues in as compared to 97 issues in the previous year. In contrast, the public sector witnessed a sharp decline in resource mobilization from Rs 311 billion in to merely 11.2 billion in They issued only one public/right issue in as opposed to 11 in As a result,

3 ISMR Primary Market 34 the total resource mobilization registered a moderate growth of 7% from Rs billion in to Rs billion in (Table 2-3). Table 2 3: Sector-wise Distribution of Resources Mobilized Sector Private 85 1,67, ,67, ,09,430 Public 3 24, ,10, ,240 Total 88 1,92, ,78, ,20,670 Note: This table includes public issues and rights issues Source: SEBI Annual Report Resource Mobilization - Industry-wise and Size-wise Distribution The share of banking and financial sector in total resource mobilization was 32.8% in which has increased to 65.3% in This sector has mobilized resources through 26 issues in and raised Rs billion as compared to Rs billion in the previous year recording a significant growth of 113%. Food processing, healthcare and information technology raised Rs 19.3 billion, Rs 18.7 billion and Rs 12.7 billion respectively in These industries have contributed around 3.1%, 3% and 2% respectively in total resource mobilization. Notably, textile industry recorded phenomenal growth in resource mobilization in through 16 issues as compared to merely 5 issues last year and raised Rs 9.4 billion in as compared to Rs 0.2 billion in the previous year. Among others, Cement & Construction, Chemical, Engineering and Entertainment raised significant amount through public and rights issues (Table 2 4). Table 2 4: Industry-wise Distribution of Resources Mobilized Industry Percentage Share Percentage Share Banking/FIs/Finance 23 1,89, ,05, Cement & Construction 4 1, , Chemical 3 11, , Electronics Engineering 2 3, , Entertainment , Food Processing 2 7, , Healthcare 7 37, , Information Technology 6 9, , Paper & Pulp Power 4 21, Telecom Textile , Others 48 2,95, ,32, Total 107 5,78, ,20, Source: SEBI Table 2 5 presents the size-wise distribution of public and rights issues in Although total resources mobilized in the primary market rose by 7% in , there was not much change in the distribution pattern of issue sizes. About 90% of the resource mobilization was through public issues of issue size above Rs 500 crore. In terms of the number of issues, however, there were only 29 issues out of 134 that were above Rs 500 crore. Notably, 84 issues (63%)

4 35 Primary Market ISMR were below Rs 50 crore. Though a majority of the issues are below Rs 50 crore, issues above Rs 500 crore constitute 90% of total resource mobilization,. Table 2 5: Size-wise Distribution of Resources Mobilized Issue Size Percentage Share Percentage Share < Rs 5 crore Rs 5 crore & < Rs 10 crore , Rs 10 crore & < Rs 50 crore 9 1, , Rs 50 crore & < Rs 100 crore 7 4, , Rs100 crore & < Rs500 crore 24 75, , Rs500 crore 25 4,94, ,59, Total 107 5,78, ,20, Source: SEBI Annual Report 2.3 Performance of Initial Public Offerings (IPOs) listed on NSE In , 57 IPOs (including SMEs) were listed on the NSE, as against only 21 in (Table 2-6). The sudden surge in the IPOs might have been driven by a positive investor sentiment in the country, which was motivated by regulatory policies of the government. Among the various IPOs issued in , Avenue Supermarts Ltd., Quess Corp Ltd. and Sheela Foam Ltd. achieved listing gains to the tune of 115%, 59% and 41% respectively, over their respective issue prices (Table 2-6). The trend so far in has been rather encouraging; as of September 2017, 76 IPOs (including SMEs) have been listed on the NSE. Among the various IPOs issued during April-October 2017, Salasar made the maximum listing gains as of October 31, 2016 (143% over its issue price) (Table 2-7). Table 2 6: Performance of IPOs listed on NSE in COMPANY ) Main Board IPOs 1 BHARAT WIRE ROPES INFIBEAM INCORPORATI , EQUITAS HOLDS , THYROCARE TECHNOLOGIES , UJJIVAN FINANCIAL SERVICES , PARAG MILK FOODS , MAHANAGAR GAS , QUESS CORP , LARSEN & TOUBRO INFOTECH , ADVANCED ENZYME TECHNOLOGIES , , , , DILIP BUILDC ,

5 ISMR Primary Market 36 COMPANY ) 12 S.P.APPARELS , RBL BANK , L&T TECHNOLOGY SERVICES , GNA AXLES , ICICI PRUDENTIAL LIFE INSURANCE CO , HPL ELECTRIC & POWER , ENDURANCE TECHNOLOGIES , PNB HOUS FINANCE , , VARUN BEVERAGES , SHEELA FOAM , , , LAURUS LABS , BSE , , , MUSIC BROADCAST , AVENUE SUPERMARTS , CL EDUCATE , SME IPOs 1 SAGARDEEP ALLOYS UNITED POLYFAB GUJARAT KKV AGRO POWERS MADHYA BHARAT AGRO PRODUCTS CROWN LIFTERS HUSYS CSULT AVSL INDUSTRIES JET KNITWEARS NANDANI CREATI GRETEX INDUSTRIES SAKAR HEALTHCARE AURANGABAD DISTILLERY DHANUKA REALTY PANSARI DEVELOPERS ART NIRMAN GLOBE INTERNATIAL CARRIERS AGRO PHOS INDIA JET FREIGHT LOGISTICS LIBAS DESIGNS PROLIFE INDUSTRIES MAHESHWARI LOGISTICS MADHAV COPPER STEEL CITY SECURITIES KRISHANA PHOSCHEM

6 37 Primary Market ISMR COMPANY ) 25 GLOBAL EDUCATI NITIRAJ ENGINEERS SANGINITA CHEMICALS AKASH INFRA-PROJECTS AIRAN LAXMI COTSPIN EURO INDIA FRESH FOODS Source : PRIME Database Table 2 7: Performance of IPOs listed on NSE in April 2017 October 2017 NSE SYMBOL COMPANY Main Board IPOs 1 SHANKARA SHANKARA BUILD PRODUCTS ) 3/22/2017 3, /5/ , SCHAND S.CHAND & CO. 4/26/2017 7, /9/ HUDCO HOUS & URBAN DEVELOPMENT CORP. 5/8/ , /19/ PSPPROJECT PSP PROJECTS 5/17/2017 2, /29/ TEJASNET TEJAS NETWORKS 6/14/2017 7, /27/ ERIS ERIS LIFESCIENCES 6/16/ , /29/ CDSL CENTRAL DEPOSITORY SERVICES (INDIA) 6/19/2017 5, /30/ GTPL GTPL HATHWAY 6/21/2017 4, /4/ AUBANK AU SMALL FINANCE BANK 10 SALASAR SALASAR TECHNO ENGINEER 11 SIS SECURITY & INTELLIGENCE SERVICES (INDIA) 6/28/ , /10/ /12/ /25/ /31/2017 7, /10/ COCHINSHIP COCHIN SHIPYARD 8/1/ , /11/ APEX APEX FROZEN FOODS 8/22/2017 1, /4/ BRNL BHARAT ROAD NETWORK 15 DIX DIX TECHNOLOGIES (INDIA) 9/6/2017 6, /18/ /6/2017 5, /18/2017 1, , , , MATRIMY MATRIMY.COM 9/11/2017 4, /21/ CAPACITE CAPACIT'E INFRAPROJECTS 18 ICICIGI ICICI LOMBARD GENERAL INSURANCE CO. 9/13/2017 4, /25/ /15/ , /27/

7 ISMR Primary Market 38 NSE SYMBOL COMPANY 19 SBILIFE SBI LIFE INSURANCE CO ) 9/20/ , /3/ DIAMDYD PRATAAP SNACKS 9/22/2017 4, /5/ , , , GODREJAGRO GODREJ AGROVET 10/4/ , /16/ MASFIN MAS FINANCIAL SERVICES 23 IEX INDIAN ENERGY EXCHANGE 24 GICRE GENERAL INSURANCE CORP.OF INDIA SME IPOs 10/6/2017 4, /18/ /9/ , /23/2017 1, , , , /11/ , /25/ BOHRA BOHRA INDUSTRIES 3/23/ /5/ CREATIVE CREATIVE PERIPHERALS & DISTRIBUTI 3 FOCUS FOCUS LIGHT & FIXTURES 4 DEVIT DEV INFORMATI TECHNOLOGY 3/29/ /12/ /30/ /13/ /31/ /17/ ASLIND ASL INDUSTRIES 3/31/ /18/ MKPL M.K.PROTEINS 3/31/ /18/ SIKKO SIKKO INDUSTRIES 4/5/ /18/ PANACHE PANACHE DIGILIFE 4/11/ /25/ INFOBEAN INFOBEANS TECHNOLOGIES 4/18/ /2/ CKPPRODUCT CKP PRODUCTS 4/26/ /9/ ZOTA ZOTA HEALTH CARE 4/27/ /10/ JALAN JALAN TRANSOLUTIS (INDIA) 13 VSCL VADIVARHE SPECIALITY CHEMICALS 14 SRIRAM SHRI RAM SWITCHGEARS 15 GLOBE GLOBE TEXTILES (INDIA) 5/18/ /31/ /22/ /2/ /25/ /7/ /12/ /23/ ACCORD ACCORD SYNERGY 6/22/ /6/ PUSHPREALM PUSHPANJALI REALMS & INFRATECH 6/27/ /10/ BANSAL BANSAL MULTIFLEX 6/30/ /12/ TRANSWIND TRANSWIND INFRASTRUCTURES 20 ACEINTEG ACE INTEGRATED SOLUTIS 6/30/ /12/ /29/ /13/ SHRENIK SHRENIK 7/6/ /18/ UNIVASTU UNIVASTU INDIA 7/14/ /27/ SHANTI SHANTI OVERSEAS (INDIA) 24 KEERTI KEERTI KNOWLEDGE & SKILLS 7/21/ /3/ /24/ /7/

8 39 Primary Market ISMR NSE SYMBOL COMPANY 25 TOTAL TOTAL TRANSPORT SYSTEMS ) 7/25/ /7/ SUREVIN SUREVIN BPO SERVICES 7/28/ /9/ VAISHALI VAISHALI PHARMA 8/7/ /22/ LEXUS LEXUS GRANITO (INDIA) 8/9/ /23/ GEEKAYWIRE GEEKAY WIRES 8/9/ /24/ SERVOTECH SERVOTECH POWER SYSTEMS 8/9/ /24/ PASHUPATI PASHUPATI COTSPIN 8/28/ /8/ MANAV MANAV INFRA PROJECTS 9/4/ /18/ SKML SRI KRISHNA METCOM 9/14/ /26/ WORTH WORTH PERIPHERALS 9/15/ /27/ MPTODAY MADHYA PRADESH TODAY MEDIA 36 RMDRIP R M DRIP & SPRINKLERS SYSTEMS 9/19/ /29/ /19/ /4/ CADSYS CADSYS (INDIA) 9/21/ /4/ AARVI AARVI ENC 9/21/ /5/ DPWIRES D.P.WIRES 9/21/ /5/ TIRUPATI SHREE TIRUPATI BALAJEE FIBC 41 INNOVATIVE INNOVATIVE TYRES & TUBES 9/21/ /5/ /22/ /5/ AIROLAM AIRO LAM 9/25/ /6/ RKEC RKEC PROJECTS 9/25/ /9/ GOLDSTAR GOLDSTAR POWER 9/27/ /10/ RELIABLE RELIABLE DATA SERVICES 9/27/ /11/ JASH JASH ENGINEER 9/28/ /11/ BETA BETA DRUGS 9/29/ /12/ CMMIPL CMM INFRAPROJECTS 9/29/ /12/ FORGE TIRUPATI FORGE 9/29/ /12/ OMFURN OMFURN INDIA 9/29/ /13/ MILT MILT INDUSTRIES 9/29/ /16/ DPABHUSHAN D.P.ABHUSHAN 10/9/ /23/ Source : PRIME Database 2.4 Debt Issues The government and the corporate sector collectively raised a total of Rs 18,410 billion (US $ 278 billion) from the primary market in Corporates continued their preference to raise capital through private placement as compared to public issues. In , private placement accounted for 96% of the total resources raised by corporates from the debt market, as against 94% in The share of private placement in the total resources mobilized registered a significant increase from 32% in to 38% in (Table 2-8).

9 ISMR Primary Market 40 Table 2 8: Resources Raised from Debt Markets Issuer Corporate 4,754 5,277 7, Public Issues Private Placement* 4,657 4,939 7, Government 9,820 10,336 11, Central 7,412 7,390 7, State 2,408 2,946 3, Total 14,574 15,614 18, Note: * Only debt placements with a tenor and put / call option of 1 year or more. Source: Prime Database (for Private placement) SEBI for Public issues (bonds / NCDs) & RBI Annual Report (for Government debt) Private Placement of Debt According to the Prime Database, a total of 663 issuers (institutional and corporate) raised Rs 7,050 billion (US $ 105 billion) through 2,835 privately placed issues in Though the resources raised from debt markets were dominated by government issues (accounting for 60% of the total resources), the resources raised by corporates from debt market in the form of public issues and private placement witnessed a significant increase of 39% in from the previous year as compared to merely 7% growth in government security issues. The resource mobilization through the private placement of debt issues grew by 43% in as compared to weak growth of 6% in (Table 2-9). Overall, there is a positive trend in total amount raised through private placement over the period, barring (Chart 2-1). Table 2 9: Private Placement Institutional and Corporate Debt Year No. of issuers No. of Privately Placed issues Resource Mobilisation through Private Placement of Debt Resource Mobilisation through Private Placement of Debt , , , , ,430 2, ,888 3,528 65

10 41 Primary Market ISMR Year No. of issuers No. of Privately Placed issues Resource Mobilisation through Private Placement of Debt Resource Mobilisation through Private Placement of Debt ,683 2, ,221 4, ,682 4, ,835 7, Source: Prime Database Source: Prime Database The issuer wise distribution indicates that during , the private sector accounted for 46.3% of the total amount of resources mobilized through the private placement of debt, followed closely by All India financial institutions and banks that mobilized around 41.2 % of the total amount (Table 2-10). Table 2-10 Issuer wise distribution of private placement of debt Issuer Issue (Rs mn ) Issue (US $ mn ) % of Issue All India Financial Institutions/Banks State Financial Institutions Public Sector Undertakings State Level Undertakings 23,61,277 20,35,917 29,04,672 38,384 31,004 43, , , ,12,194 3,22,671 6,71,762 5,090 4,958 10, ,219 2,38,479 2,04,889 1,276 3,590 3, Private Sector 18,99,459 23,42,046 32,65,472 30,950 35,939 48, Total 46,59,981 49,39,112 70,49,545 75,844 75,490 1,05, Source: Prime Database

11 ISMR Primary Market 42 The sectoral distribution shows that Banking and Financial Services continued to dominate the private placement market, accounting for 66% in Among others, power sector contributed to 10.7% of total private placement in (Table 2-11). Table 2 11: Sectoral Distribution of Resources Mobilized through Private Placement (in %) Sector Banking Financial Services Power Housing/ Civil Construction/ Real Estate Travel/Transportation Others Total Source: Prime Database Corporate Sector There was a preference for raising resources in the primary market through debt instruments, and the private placement of debt emerged as the major route for raising resources. In , the total resources raised by the corporate sector rose by 39% to Rs 7,670 billion, compared to the gross mobilization of Rs 5517 billion in The equity route was used to raise 3.8% of the total resources through public equity shares in , slightly higher from 2.7 % used in The share of rights issues was 0.4% in The resources raised through the debt issues (debt public issues and debt private placements) accounted for about 95.8%, which reflects the preference of borrowers for debt capital over equity capital. Among the debt issues, the share of debt public issues declined from 6.1% in to 3.9% in However, the share of debt private placements increased from 89.5% in to 91.9% in Table 2 12: Resources Raised by Corporate Sector Year Public Equity Issues ( mn) Rights Issues Debt Public Issues Debt Private Placements Total Resource Mobilisation Total Resource Mobilisation (US $ mn) Percentage Share in the Total Resource Mobilisation Public Equity issues Rights Issue Debt Public Issues Debt Private Placements ,69,410 83,211 25,000 18,98,299 24,75,920 54, ,61,820 95,937 94,310 20,25,899 26,77,966 59, ,04,710 23,750 3,56,110 25,92,290 30,76,860 60, ,970 89,447 1,69,820 35,27,590 38,51,827 70, ,610 45,733 4,23,830 28,78,929 34,35,102 57, ,190 67,501 97,130 46,57,131 48,51,952 79, ,48,150 92,390 3,38,120 49,39,112 55,17,772 83, ,91,040 34,160 2,95,470 70,49,545 76,70,215 1,17, Note: Only debt placements with a tenor and put / call option of 1 year or more. Source: Prime Database (for Private placement), SEBI (for Public issues and Right issues)