State-owned Oil and Natural Gas Corporation (ONGC) may be keeping its fingers crossed as its follow-on public offer (FPO) hits the market, but those in the business of printing application forms and issue prospectuses are screaming huzzah already.
Together with the spate of non-convertible debenture, or NCD, issuances lined up, the issue comes as a Godsend at a time when they have been struggling to make their printing units run at full capacity.
The Rs12,000 crore FPO, which involves an offer for sale of 42.78 crore equity shares to the public, alone translates into a business opportunity of Rs8-10 crore for the printers.
Melwyn Fernandes, managing director, SAP Print Solutions admitted as much. “The ONGC FPO does come as a relief for us. Barring a few small IPOs and one from L&T Finance, not many big primary issuances have hit the markets in recent times,” he said.
The number of red herring prospectuses and application forms printed typically depends on the size of the issue, the number and quality of book running lead managers involved and the prevailing market sentiment.
For an issue size of Rs12,000 crore, the number of 300-page prospectus printed may vary from 20,000 to 25,000 with each costing around Rs65-70. Also, the number of application-cum-bid forms printed may vary from 1.5 crore to 2.5 crore with each costing around Rs3.50.
Printers dependent on the securities market have seen revenue growth taper over the last few months as companies deferred their public offer plans in view of the weakness in equity markets. Also there has been a dearth of rights issues.
“For us, the revenues from printing of IPO prospectus and forms constitute more than 50% of overall sales turnover, and with slowdown in new equity issuances, our business has been hit hard as revenues from IPO printing have reduced to half,” said Jayesh Shah, director and owner of Crystal Forms Pvt Ltd, Mumbai.
According to data from Prime Database, Indian companies have raised just around Rs9,000 crore through 21 IPOs and FPOs so far in the first five months of this fiscal. Compare this with the last two fiscals, which had seen primary issuances of over Rs46,000 crore each. Also, there have been just five rights issues so far this fiscal, garnering around Rs120 crore.
To make matters worse for the printers, recent environmental and investor-friendly initiatives from the market regulator have also gone against their business. There has been drop in the volumes of annual reports that companies ordered for printing as many have started sending out soft copies on compact discs or through email to investors.
“The companies have started sending soft copies to some of the investors, which has resulted in a 25-30% drop in the revenues that we get from printing these annual reports,” said Shailesh Vyas, senior vice-president at Mumbai-based Western Press Pvt Ltd.
The market regulator has mandated listed entities to send out soft copies to shareholders who have given their consent for the same and supply hard copies of abridged annual reports to others. The listed entities are required to send hard copies of full annual reports only to those who request for the same.
Meanwhile, Sebi has also proposed in its board meeting that the IPO form size be reduced to half and the prospectus made more concise.
Also, mutual funds are required to send soft copies of scheme annual reports to those unit holders whose email ID is registered with them, which is seen impacting the printers’ business further.
In such a scenario, the printers till now were banking on the NCD issuances.
“The NCD and other debt issuances have ensured our survival. We are able to just meet our overhead expenses printing material for these debt issues and achieve breakeven,” said Shah.
Among others, Shriram Transport Finance, Muthoot Finance, Manappuram Finance and Shriram City Union have made NCD issues in recent times.
Going ahead, few equity issuances this month along with debt issuances and infra bond issues are seen supporting the printers’ business.
“Fortunately, there has been a spate of bond issues that have partly compensated for lack of orders from equity issuances. But with quarter ending coming nearer, few companies are planning to come out with IPOs to avoid refilling the prospectus with latest quarterly results. Also, some large debt issuances from government institutions and infrastructure bond issues are likely to hit over the next 3-4 months that will support our business,” said Fernandes.
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