Indian companies raised Rs 1.25 lakh crore in 2019, the second-highest quantum of funds since CY05, a new report shows. Out of this, primary market issuance aggregated Rs 1 lakh crore versus Rs 66,400 crore in CY18.

The report by Edelweiss said that rights issues made a grand comeback to the fund-raising arena garnering about Rs 52,000 crore, implying a share of 41 percent of total issuances, while QIP accounted for Rs 32,500 crore.

This year, analysts are even more optimistic about the prospects of the Indian primary market. Edelweiss believes CY20 holds promise with initial public offerings (IPOs) from unique business themes potentially vying for investor attention and favour.

Improving liquidity conditions would be one of the major factors driving the revival of the primary market in CY20, it added. As per the brokerage, asset management companies, niche technology firms, digital platforms, infrastructure, and telecommunications players are likely to tap the primary market in 2020.

As many as 16 IPOs worth Rs 16,000 crore have already obtained SEBI approvals and another 13 worth Rs 21,200 crore await the regulatory nod and it expects the pipeline to grow stronger and larger as the year passes by. A few of these companies are SBI Cards and Payment Services, UTI Asset Management, Burger King, Samhi Hotels, Bajaj Energy, Easy Trip Planners, and Equitas Small Finance Bank.

"Considering their under-penetrated nature, BFSI themes will continue to evince investor interest in our view. From the BFSI umbrella, asset managers, insurance companies, small and microfinance banks will be the themes to watch out for," the report stated.

Indian Primary Market in 2019

The CY19 saw a newer trend emerging as liquidity chased lofty valuations in quality names backed by strong promoters as well as new-age themes such as asset management, insurance and ever-green but under-penetrated BFSI space (either via OFS or QIP), the brokerage reported.

"While banks and NBFCs raised funds to shore up their capital, for asset managers and insurance players, the fund-raising was necessary to meet the stipulated public shareholding norms. Cash-starved telecom majors too were seen raising money through rights issues with their valuations and share prices sulking at multi-year lows," it stated.

A major share of the rights issue pie is attributable to telecom giants Bharti Airtel and Vodafone Idea (Rs 25,000 crore each). The report further noted that encouraged by improved market sentiment, BFSI majors made hay raising monies – Axis Bank (Rs 12,500 crore), Bajaj Finance (Rs 8,500 crore), RBL Bank (Rs 2,000 crore), YES Bank (Rs 1,900 crore) and Lakshmi Villas Bank (Rs 400 crore) – to fulfil their growth capital needs. Other major names were DLF, Shree Cement, and Godrej Properties.

QIPs accounted for Rs 32,500 crore in CY19, 28 percent of funds raised, followed by an offer for sale (OFS) worth Rs 25,800 crore by 22 different companies in 32 tranches, the data said. About Rs 12,300 crore was raised via IPOs by 16 companies in CY19.

Listings

The year also marked the highest issue-weighted listing premium in the last five years. CY19 turned out to be phenomenal as most IPOs ended the year generating wealth for investors.

Despite tepid market conditions, a majority of IPOs delivered positive listing gains. Out of 16 IPOs, 11 (70 percent) debuted at a premium to the issue price, said the report.

Three out of 16 issues have delivered over 100 percent returns at end-CY19. While IRCTC shot up 192 percent, IndiaMart and Affle India yielded astronomical gains of 112 percent each. Meanwhile, Polycab India delivered returns of 84 percent post debut.

Three debutants delivered returns in the range of 50-100 percent at end-CY19 — Polycab India (84 percent), Neogen and Metropolis (66 percent each).

However, the biggest IPO of the year – Sterling & Wilson – turned out to be the biggest dampener, down almost 60 percent at end-CY19 with respect to its issue price.

Meanwhile, the S&P BSE IPO Index, a gauge of new listings in their first two years of trading, closed up 42 percent in CY19 compared with a 14 percent gain for the Sensex.

Outlook for 2020

Edelweiss expects that, much like CY19, appetite for high-quality companies targeting QIPs and OFS will generate strong interest this year as well. The government is expected to continue to tap primary markets to unlock value in PSUs as it seeks to meet the hefty disinvestment target.

"A large number of PSU banks are looking to augment their capital base through QIP or monetising their stake in subsidiaries through OFS and IPOs. The shift in monetary policy stance by various major central banks in CY19 augmented global liquidity. This along with expectations of a positive outcome of the US-China trade talks at the end of CY19 further spurred risk-on among foreign investors, which swerved huge investments into emerging markets," the brokerage explained.