Tepid listings, fear on the Street scare away IPO aspirants

Mumbai: The dream run for the initial public offer (IPO) market appears to be coming to an end, at least temporarily. A spate of poor listings recently and weak market sentiment are forcing companies, looking to raise money through IPOs, to delay their plans or cut their valuation expectations from the share sale. Besides, changes in the accounting system — from Indian GAAP to Ind-AS — from April 1 is also prompting companies to delay their IPOs.

At least six proposed IPOs of companies such as ACME Solar Holdings, Barbeque Nation Hospitality, Prince Pipes & Fittings, Seven Islands Shipping and Gandhar Oil Refinery have postponed their offers by a few months, said investment bankers. ACME Solar Holdings has withdrawn its Rs 2,200-crore IPO plans. A senior company official told ET it had withdrawn the draft red-herring prospectus for refiling it to comply with revised end use of the funds.

“As per Sebi guidelines, an issuer needs to refile prospectus if it needs to modify end use of IPO beyond 20 per cent. Since we had deadline to fund our under construction projects, which were supposed to be funded from IPO proceeds, we funded them from internal accruals and promoter equity instead of awaiting IPO proceeds,” said spokesperson of Acme Solar Holdings.


Restaurant chain Barbeque Nation Hospitality, which had got Sebi’s nod for an IPO in January, is also learnt to have delayed its IPO plans. CMS Info Systems spokesperson said they had time till November 2018 to launch the proposed IPO and they will decide on a new date. A Seven Islands Shipping spokesperson said: “We are considering the timing of our IPO and will be launching it at the earliest opportunity.”

Email queries sent to Prince Pipes & Fittings, Krishna Institute of Medical Sciences, Gandhar Oil Refinery and Barbeque Nation Hospitality did not elicit any response till the time of going to press.

Investment bankers said several IPObound companies have been worried about the fate of their issues if they launched it immediately. The fall in the market dented sentiment with foreign and domestic investors skipping several offers, a contrast to the situation before February when every issue was lapped up. The biggest example of lack of demand was the Rs 4,000-crore IPO of ICICI Securities, which failed to garner full subscription last month. The issue was subscribed just 88 per cent and listed at 17 per cent discount to the offer price early this week. Previously, the Rs 4,229-crore offer of state-owned Hindustan Aeronautics witnessed an overall subscription of 99 per cent. Moreover, five of the seven IPOs listed in March were at a discount to their offer prices.

“Many are worried about the response to the recent IPOs which were grossly overpriced,” said Dara Kalyaniwala, VP-investment banking, Prabhudas Lilladher. “Now, merchant bankers are convincing the companies to reduce the valuations”.

The changes in accounting system also led to a delay in the IPO plans of some of the companies, according to bankers.