25 companies call-off IPOs due to sluggish market

Owing to a sluggish trend in the stock market, at least 25 companies have called off their Initial Public Offer plans so far in 2011, a report has said.

Mostly from the real estate and power sectors, these 25 IPOs (Initial Public Offers) were together estimated to raise about Rs 31,000 crore (Rs 310 billion) worth capital to fund the companies' business expansion plans.

The BSE benchmark Sensex has lost more than 23 per cent since the beginning of 2011 and hit its 52-week low of 15,478.69 on November 23, 2011.

"The bad mood of capital markets has led 25 companies to call off their IPOs during the 2011 calendar year. The probable amount that these companies were planning to raise was to an aggregate of Rs 31,000 crore," brokerage firm SMC Global Securities said in a report.

Even after getting approval from market regulator Sebi, these companies could not launch their IPOs within the valid period of one year from the date of approval, mainly on account of the ongoing turmoil in the capital markets.

These 25 companies having cancelled their IPOs included a host of the real estate players, such as Lodha Developers, Ambiance Real Estate, Kumar Urban Developers, Neptune Developers, BPTP, Raheja Universal and Lavasa Corporation.

Besides,

a number of power sector companies, such as Sterlite Energy, Jindal Power, Avantha Power and Ind Bharat Power Infra, have also called off their IPO plans.

Also, the government's disinvestment programme to bring public issues of several blue-chip PSUs couldn't take off.

"If the government is not getting enough confidence to bring FPO (follow-on public offer) for ONGC, how will the promoters of any smaller companies stick their necks out? This is surely impacting the confidence of the promoters of the smaller companies," SMC said.

Besides, a few companies such as Micromax have already announced IPO deferrals even though approval for Sebi validity still remains.

There are at least 10 companies who have valid approval from the market watchdog and are left with just 2 months in their validity period of one year from the date of Sebi approval like Pride Hotels, Tara Jewels.

SMC said that the cancellation of IPOs could impact the companies' ability to raise capital to finance their expansion projects, which could eventually result in a slowdown in capacity building and job creation.

It also noted that the trend in the IPO market may lead to panic in the minds of the private equity (PE) funds, as they would be unable to exit from their investments.

The PE funds generally invest in unlisted companies in the hope of a later exit through IPOs.