Fund-raising via share sales dips 50% in first half

MUMBAI: Equity fund-raising in the first half of this year fell by nearly half as high valuation expectations and a struggling secondary market kept investors away. Share sales fell to $8.2 billion, from $15.6 billion a year ago, Dealogic data shows. Number of deals fell 38% to 60,it showed. “Relatively rich valuations, which render India more expensive than several developed markets, coupled with macro headwinds, are among the reasons why equity capital markets activity has been lower this year,” says Sumit Jalan, head of ECM for India at Credit Suisse.

Besides, select sectors like say infra, real estate, financial services having been beaten down so much and are trading much cheaper in the secondary market , so there is a lot less incentive to take the primary market route. Among the top five ECM deals this year were the follow on issues of Power Finance Corporation ($1,031 million), Cairn India ($2,091 m), Tata Steel ($753 m), Central Bank ($557 m) and the $550 m convertible of Essar Energy.

The Sensex has fallen around 10% this year even as global funds net bought shares worth $0.12 billion year to date. According to Dealogic, followon accounts for 81.9% of India ECM volume, up 16% compared to the 65.7% achieved in 2010 YTD. IPOs represent only 9.6% of the India ECM market this year so far, down from 25.9% in the same period last year. Sam Mahtani, director, emerging market investments at the London-based F&C is of the view that the high interest rate scenario, inflation and the existing corruption is impacting investor outlook which in turn has led to less equity capital market activity.

“Globally, the question is whether this is a soft patch or does this signal a significant slowdown,” he told ET. He is, however, confident that once capital market activity picks up over the next 12 months deal flows will also pick up. “We are at an inflection point,” he said, adding that things were getting better at the margin.