Over 70 companies including SMEs they have received clearances for the IPO but given the current mood in the market, it seems like primary market activity is going to get pushed back a bit. How are you assessing the situation in light of this?
Well you are absolutely right the expectation was that given the historical mandate which was delivered in the elections this year, you would see the entire pipeline of companies which have already received Sebi approval or which have also filed with Sebi for approval, getting loans in the market. But, of course, over the last two-three months, because of global and local factors, you have seen a significant correction in the markets, especially in the small and midcap space. This is where a bunch of these new listings would eventually belong and this is where you have seen a slowdown in activity.
You have hardly seen any new issues getting launched. Even going forward, I do not expect that the primary market would see a revival in the short term. As we all know primary markets traditionally follow the secondary markets. So, till the time you do not see a bit of bullishness coming in the secondary market, a bit of stability coming in the secondary market, you would not see too much activity on the primary market front as well.
But among the DRHPs which have been filed, which do you think are the ones more eagerly awaited based on the size and the nature of the business?
You are seeing filings. Companies which are eager to raise money from the markets or companies where you have existing investors, private equity investors who are looking for an exit, are still continuing with the filings right now in the hope that when the market revives, they are in a position to launch their IPOs immediately. The entire process from filing to launch can take six to seven months. So companies which are eager to tap the primary market are doing the filings right now.
Coming to the rail IPOs, after RITES and RVNL, we will have IRCTC as well as IRFC in the coming months. One of them made an unsuccessful attempt earlier. Can they do better than some of the previous rail listings?
Well sure. There is really no concern in terms of the quality of the promoters as also the quality of the management. These entities have been running for several years and in a lot of cases, they have virtual monopolies in the space that they operate in.
As far as the quality of the issuer is concerned, I do not see any concern on that front. The other aspect of course is the pricing and given the weakness in the market, I would expect the government to make the pricing attractive so that one is able to get the desired institutional and retail response.
Which are the NBFCs that are seeing the most pain despite attempts by the government to revive them?
Well without taking any names, we are seeing a big risk aversion in the NBFC sector. NBFCs come to the public issue market only as a last resort and they would ideally like to raise money through the private placement route wherein your banks and mutual funds have been the traditional investors and they will all retail NCDs only as a last resort because the process is longer, the coupon that you have to pay is higher, there are regulatory documents which have to be filed as well so you are seeing that NBFCs are not being able to raise money through the private placement market and which is why they are coming out with retail NCDs that which too are actually not being fully subscribed.
We were just looking at our data and in the last one year, out of all the NCDs which have been launched, just four have managed to get a complete subscription. So across the board, right from the IL&FS crisis last year, you are seeing huge risk aversion. It has also got to do with the fact that AAA rated issuers have been defaulting on payments. So, the system is a bit shaken right now but I expect that with the measures being taken by the government in terms of capital infusion to the banks, there could be some pickup in this space as well. A far as the blue chip NBFCs are concerned, they would be able to raise capital through the NCD route.
