Stocks
Only Rs1,619 crore raised through IPOs in 2013

The year 2013 highlights the continuing dismal state of fund raising through the IPO route by unlisted companies in the last three years

The year 2013 ended with a mobilisation of only Rs1,619 crore through IPOs according to Pranav Haldea, managing director of PRIME, the country’s premier database on primary capital market. This was the lowest-ever mobilisation in the last 12 years, the previous low being in 2001 when only Rs296 crore had been raised through IPOs. The highest-ever mobilisation through IPOs was as recent as in 2010 at Rs37,535 crore.

 

The year 2013 highlights the continuing dismal state of fund raising through the IPO route by unlisted companies in the last three years with 2011 at Rs5,966 crore and 2012 at Rs6,938 crore.

 

Number of companies and amounts raised through IPOs in the last 12 years are as follows, according to Prime Database:

 

YEAR

NO.OF
COMPANIES

AMOUNT
(Rs Crore)

2002

6

1981

2003

12

1670

2004

25

13121

2005

53

9990

2006

73

19852

2007

100

34179

2008

37

16904

2009

20

19544

2010

64

37535

2011

37

5966

2012

25

6938

2013

38

1619

 

There were just 3 main-board IPOs during the entire year: Just Dial: Rs919 crore, Repco Home Finance: Rs270 crore and V-Mart Retail: Rs94 crore (previous year 11 IPOs for Rs6,835 crore). The year, however, witnessed a flurry of activity on the SME platform; there were as many as 35 IPOs which collected a total of Rs335 crore (previous year 14 IPOs for Rs103 crore).

 

According to Haldea, the market has really not been IPO-friendly for last three years due to a variety of factors. This includes overall poor sentiments, secondary market volatility, promoters not getting the valuations they think they deserve, apprehensions of regulator’s views on valuations, lack of appetite for equity of big-time issuers from the infrastructure sector, especially power, telecom and real estate. In addition, the government has also been unable to push through its divestment programme.

 

Finally, the biggest disappointment for the primary market has again been the lack of divestments by the government. Despite a huge target of Rs40,000 crore for FY 2013-14 and continuing announcements, with 9 months already gone, only Rs2,964 crore, or just 7% of the target) has been achieved. Again, like in previous years, bulk of the divestments may take place in the last quarter of the fiscal.

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Urban Indian consumer outlook improves in December 2013 by 0.4 points, says Zyfin Research

The Consumer Outlook Index, which reflects current and future spending plans, employment and inflation outlook of urban Indian consumers has registered a score of 40.2 for the month of December 2013, an uptick of 0.4 points compared to the previous month, according to a release by ZyFin Research

The Consumer Outlook Index, which reflects current and future spending plans, employment and inflation outlook of urban Indian consumers has registered a score of 40.2 for the month of December 2013, an uptick of 0.4 points compared to the previous month, according to a release by ZyFin Research.

 

ZyFin Research’s Consumer Outlook Index is India’s monthly barometer of consumer sentiment. The index is based on a monthly survey of 4000 consumers across 18 cities. The Index reflects consumers’ current and future spending plans, employment and inflation outlook.

 

Key highlights of the ZyFin consumer outlook index for December 2013 are as follows:

 

(a) The Consumer Outlook Index has been trending up for two consecutive months. In December there was a month on month uptick of 0.4 points and a rise of 1.2 points from an all-time low of 39.0 that was witnessed in October 2013.
 

(b) The Inflation Sentiment Index rose by 0.3 points from the last month to 24.3. This is the second month in a row that the index has risen after having registered its lowest score of 22.7 in October 2013. A steady improvement in general price sentiment has been instrumental in improving anticipations around inflation during the month, despite the current level continuing to suggest heavy pessimism.
 

(c) Amid a steadily improving borrowing comfort level, the Spending Sentiment Index moved up by 2.0 points to score 32.9 in December 2013.
 

(d) Consumers in metro cities such as Mumbai, Bengaluru and Hyderabad are the most optimistic in terms of consumer outlook. Some of these consumers have kept their spending plans on hold until improvement in overall economic conditions.
 

(e) Region-wise, consumers in the Southern and Western states remain the most optimistic, while those in the Eastern states are most pessimistic. Employment sentiments are the strongest among consumers in the South while consumers in the Western states are most optimistic about easing of general price levels.

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Fiscal deficit surges to 94% of budgeted target in April-November FY2014

Fiscal stress has been building up due to weak revenue collection amid a slowing economy, lacklustre asset sales and elevated spending, says Nomura in a research note

The government’s fiscal deficit in the first eight months (April-November) of FY14 reached 93.9% of the full-year budgeted target compared with 80.4% in the same period last year. Fiscal year-to-date (FYTD), net tax revenue growth remained muted at 7.2% year-on-year (versus the budget target of 19.1%), while expenditure growth at 17.7% year-on-year was higher than the budgeted target of 16.5%. In November 2013, government spending grew at 12.5% year-on-year, lower than 32.2% year-on-year in October 2013, whereas net tax revenues grew at 11% year-on-year versus 23.4% year-on-year in October 2013. These statistics are given in a research note by Nomura and the key data are given in the following table:

 


According to Nomura, fiscal stress has been building up due to weak revenue collection amid a slowing economy, lacklustre asset sales and elevated spending. The government looks likely to miss its revenue target owing to weaker-than-budgeted GDP growth, lower-than-anticipated collection under the service tax amnesty scheme up to November.

 

According to Nomura analysts, “Our fiscal run rate monitor suggests that the run rate on the fiscal deficit remains high as the government is yet to cut back on expenditure even as tax revenue growth remains much weaker than expected.” This is shown in the following figure:

 


The research note remarks, in such a scenario, the government faces the Hobson’s choice of either sharply paring back on spending in the next four months to enable it to meet its fiscal deficit target of 4.8% of GDP in FY14 (but at the expense of hurting growth) or supporting growth by continuing to spend but missing its fiscal deficit target, inviting the ire of rating agencies and investors and damaging its own credibility. It expects the government partly to cut spending and partly to delay payments until the next fiscal year in order to meet the fiscal deficit target, which would hurt GDP growth in H1 2014.

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COMMENTS

Yerram Raju Behara

3 years ago

Government's credibility is already at the low end. With the next few months to distribute their pre-election free bites, and with 'trust deficit' already looming large on UPA regime, the government would risk higher fiscal deficit. They should be now sure that they would not be the choice of the majority at the next bourses. They would not mind handing over empty treasury to the next government! The risk is for them and fun would be for the opposition benches. Political economy is in for a serious toss with no clue as to where and to what extent the free bites have to go. Unless we have a strong government at the Centre capable of pushing economic and financial reform agenda, it may be difficult to see India on the growth turnpike.

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