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IPO market in a drought
Dec 20, 2013

Amidst poor capital market conditions, fund raising via Initial Public Offers (IPOs) has hit a dry spell. Only Rs 16 bn have been raised in 2013 in Indian stock markets (figures until November). This is possibly the lowest amount that has been raised via IPOs in any year over the last decade. Lack of retail interest and poor market sentiments are primary reasons behind waning interest in IPOs. As a result, most corporates are unwilling to hit the market with fresh issuances which has further impacted the fund raising exercise in IPO markets.

Irrational pricing is another factor which has kept investors at bay. Over the last 3 years nearly 65% of the companies that raised money via IPOs are currently trading below their issue price. As such, most investors have lost money. This has hurt investor sentiments and has resulted in lack of appetite for new issues. Unless the secondary markets offer a boost or solid companies with established track record seek to get listed at reasonable prices, the market for primary issuances is likely to remain lull.

Data source: Business Standard & Prime Database
* Till November 2013

This Chart Of The Day was published in The 5 Minute WrapUp - Was Raghuram Rajan right in not raising interest rates?

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