The large number of initial public offerings(IPOs) are expected to push up demand for credit specific sectors.
The large number of initial public offerings(IPOs) are expected to push up demand for credit specific sectors. SBI in a report mentioned, "For example, sectoral analysis reveal that credit growth in sectors like power, mining and quarrying and metals are highly correlated with the amount raised through IPO in these sectors. Another interesting observation is that credit growth in these sectors has positive correlation with GDP growth.”
Between FY10 and FY18 (up to 31 Oct’17), maximum amount of Rs 43,921 crore has been raised by the power sector, followed by insurance, mining, minerals and metals, finance and construction. Insurance sector has come to the market this fiscal with four companies alone raising Rs 31,320 crore. Recently, raising money through IPO route has been increased in India.
The current fiscal has witnessed a significant interest in IPO market with Rs 49,175 crore raised in just 7 months period. Interestingly, this is more than the amount raised between FY12-FY16 put together. The major sectors which went to the market between FY10-FY17 in India includes Power, Insurance, Mining, Minerals and Metals, Finance and Construction. Insurance sector came to the market this fiscal only with 4 companies alone raising Rs 31,320 crore.
"The higher amount of subscription and the amount of money raised which is multiple times the issue size shows the market appetite and investor’s acceptance of equity as an asset class. The rising interest in IPO could be attributed to a number of reasons. On the one hand, it is the easing of listing criteria for MSME resulting in more number of companies hitting the capital market and on the other hand, increased interest is from retail investors and strategic investors like sovereign wealth funds who view the rising market as an opportunity to deploy money," the report added.
Moreover, the surge in the secondary market in general has encouraged many companies to hit the equity market for capital in search for better valuations. After the muted performance till FY15, Indian IPO market picked up with 70 and 106 companies listed in the last two years. This further gained momentum in the current fiscal with 112 companies already hitting the IPO market till October 2017.
India raised a whopping Rs 46,121 crore and Rs 49,438 crore in FY10 and FY11 respectively. After this the market had turned lukewarm. In the current fiscal, Indian companies have raised Rs 49,175 crore in just 7 months period. Interestingly, this is more than the amount raised between FY12-FY16 put together.
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 "IPO deluge may spur credit growth")
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