Experts say secondary exits were a highlight of this year. Given the economic uncertainty, not many companies want to raise capital for expansion and going ahead too many IPOs could be largely OFS, they add.
Several private equity (PE) players such as Government of Singapore, Motilal Oswal PE fund, Gaja Capital, Capvent India and Standard Chartered Private Equity have managed to liquidate their holdings through IPOs during the year.
“Lot of corporates had raised required capital through private equity (PE) funds during the period between 2010-2013. Although PE funds are long term investors, they would eventually seek exits. In 2016, we have seen them make partial exits from various companies,” said Gaurang Mehta, executive director, investment banking, Axis Capital.
Mehta added that this was not essentially a negative sign for markets
as in majority of the cases companies didn’t need any fresh capital and hence didn’t dilute their stakes.
The trend of providing exits to investors through IPOs gained momentum in 2015. More than 60 per cent of the Rs 13,614 crore raised through IPOs during 2015 was on account of OFS. According to experts, the rally in the market since late-2013 and adequate liquidity, has provided a platform for PE exits.
Investment bankers say with the emergence of PE funds as the frontline investors in startups, the shape of capital markets
has witnessed a significant change in the last two years.
“Companies are no longer considering IPO route for initial fund raising. In the beginning stages they prefer to tap PE funds rather than public institutional investors for capital expansion. This is also a key reason behind buoyancy in the PE and VC space,” said Ajay Garg, managing director, Equirus Capital.
According to a section of capital market experts, this trend is also on account of slowdown in capital expansion plans of India Inc. Due to volatility in the markets
and uncertainty over the outlook of various sectors, lot of companies are learnt to have postponed their fund raising plans. The fund raising through qualified institutional placements(QIP) has fallen by three-fourth during 2016 to Rs 4,480 crore while rights issuances are dropped to 13-year low of Rs 1,913 crore during the year.