When follow-ons were defeated by new players
The year 2012 saw the least amount of money raised through follow-on public offers since at least 2004, even as fund raising through equities came in at over twice the amount over 2011.
The year 2012 saw the least amount of money raised through follow-on public offers since at least 2004, even as fund raising through equities came in at over twice the amount over 2011.
Companies raised a cumulative Rs36,253 crore through the equity route, but completely shunned follow-on public offers in favour of other means of fund raising, according to data from Prime Database.
Experts believe that with the Securities and Exchange Board of India (Sebi) approving new methods to divest stake in an already listed firm like offer for sale (OFS) and institutional placement programme (IPP), promoters found them much more efficient and quicker to raise equity capital than follow on public offering of shares.
“FPOs as such had been losing ground to methods like institutional placements and were mostly used by government to raise money through divestments. With new routes like IPP and OFS, the promoters and the government found them much easier, faster and more cost-effective ways to raise money,” said Girish Nadkarni, executive director & head of equity capital markets and institutional equities at Avendus Capital.
The FPO route had been used to raise Rs8,055 crore in 2011 and Rs31,577 crore in 2010 mostly for public divestments.
The OFS route approved by Sebi in January 2012 brought in the most, raising Rs23,769 crore or 65.56% of the total amount raised by companies on the Indian equity markets.
The IPP method saw two issues, with Godrej Properties and Godrej Industries selling shares worth Rs841 crore.
While FPOs take around 4-5 months as company needs to file draft prospectus with Sebi and then allocate shares through book building, QIPs take 4-6 weeks and the newly introduced methods like OFS take still lesser time.
Prithvi Haldea, chairman, Prime Database, said regulatory requirement of a minimum public shareholding may have led to the spate of fund-raising through OFS.
Other traditional routes, like initial public offer and qualified institutional placement, netted Rs6,938 crore and Rs4,705 crore, respectively in 2012.