Nearly three weeks before the onset of FY21, on March 11 last year, the Covid-19 epidemic was declared a global pandemic by the World Health Organization (WHO). And, two weeks later, India saw the imposition of a strict 21–day nationwide lockdown aimed at taming the spread of the deadly virus.
While the stock markets were kept open, the equity indices saw a massive fall. On March 24, 2020, the S&P BSE Sensex touched the year’s low of 25,638.9 points—down 16,635 points (falling over 39%)—in just 46 trading days since the then high of 42,274 points on January 20, 2020.
However, since then, the pandemic seems to have become kind of immaterial as far as capital raising by India Inc. is concerned. Because, corporates have raised an all-time high amount of over ₹1.88 lakh crore through public equity markets in FY21. “This was more than double of the ₹91,670 crore that was raised in FY20,” says Pranav Haldea, managing director, PRIME Database Group, which operates India’s premier database on the capital markets. “The previous highest amount raised in a financial year was over ₹1.75 lakh crore in FY18.” Of the total amount of ₹1.88 lakh crore, fresh capital made up nearly ₹1.37 lakh crore, while the remaining ₹51,908 crore were offers for sale.
The key highlights of the fiscal were strong retail participation in initial public offers (IPOs), huge listing gains, and the highest-ever capital raised through qualified institutional placements (QIPs)—which are preferential private placements by listed companies to qualfied institutional buyers with expertise and financial power that allows them to evaluate and participate in capital markets—and infrastructure investment trusts (InvITs) / Real estate investment trusts (ReITs)—both are investment vehicles that allow developers to monetise revenue-generating real estate and infrastructure assets, while enabling investors or unit holders to invest in these assets without actually owning them.
On main-board IPOs, Haldea argues that contrary to the despondency due to the pandemic, 30 IPOs came to the market, collectively raising ₹31,268 crore during FY21. This was an increase of 54% from the ₹20,350 crore raised through 13 IPOs in FY20. While the largest IPO in FY21 was from Gland Pharma for ₹6,480 crore, the average deal size of the 30 IPOs was ₹1,042 crore.
The overall response to the main-board IPOs of the year was very good, as 18 IPOs were oversubscribed more than 10 times, while four IPOs were oversubscribed by more than three times, and the remaining eight IPOs were oversubscribed between one and three times.
And, as far as retail investors are concerned, the fiscal witnessed tremendous response for IPOs. The highest number of applications was received by Indigo Paints (25.88 lakh), followed by MTar Technologies (25.87 lakh), and Mazagon Dock Shipbuilders (23.56 lakh).
According to Haldea, the response to the IPOs was further buoyed by strong listing performance. On the basis of closing price on listing dates, of the 28 IPOs which got listed in FY21, 19 gave a return of over 10%. Burger King gave a stupendous return of 131% followed by 123% return from Happiest Minds Technologies, and 109% returns by Indigo Paints. Moreover, based on the closing prices of March 26, 18 of the 28 IPOs listed thus far, are trading above their respective issue prices.
On the IPO pipeline for FY22, Haldea points out that it continues to remain strong with 18 companies waiting for approvals to raise a proposed ₹18,000 crore, from the Securities and Exchange Board of India (SEBI). And, another 14 companies are awaiting SEBI's approval to raise nearly ₹23,000 crore.
Beyond the main-board IPOs, the IPOs from the small and medium enterprise (SME) segment, however, saw over 44% annual decline in FY21, where 28 SME IPOs mopped up a total of ₹243 crore in comparison to ₹436 crore collected by 45 SME IPOs in FY20.
However, follow-on public offerings (FPOs)—which involve public issue of shares, to investors at large, by companies which are publicly listed—made a comeback after a decade, as ₹15,029 crore were mopped up through FPOs, which was the biggest raise in a fiscal since ₹13,084 crore was raised in FY11. The comeback is primarily on account of the YES Bank FPO where ₹15,000 crore was raised in the aftermath of the Reserve Bank of India (RBI) coming out with a scheme to revive the bad debt-ridden private lender.
These apart, FY21 also witnessed a 73.8% annual increase in capital raised through the Offers for Sale through Stock Exchanges, or OFS (SE), route—which is meant for the dilution of promoters’ holdings. Against ₹17,326 crore raised in FY20, OFS (SE) raised ₹30,114 crore during FY21.
Of this, the government’s divestment accounted for ₹19,927 crore, or 66% of the overall amount. The largest OFS (SE) was that of Tata Communications at ₹5,386 crore, followed by Hindustan Aeronautics’ ₹4,961 crore, and IRCTC’s ₹4,408 crore. Overall, OFS (SE) accounted for 11% of the total public equity market raising during FY21.
As far as disinvestments are concerned, FY21 proved to be a dismal year with just ₹33,159 crore being raised by the central government. Public offers and OFS (SE) were the most used modes in FY21, which saw a combined raise of ₹22,594 crore from IPOs of IRFC, Mazagon Dock Shipbuilders, Railtel and OFS (SE) of Hindustan Aeronautics, IRCTC, and SAIL, among others. IPOs and OFS (SE) were followed by buybacks which saw a mop-up of ₹6,441 crore through issues of GAIL, NMDC, NTPC, NALCO, and RITES among others.
Also, similar to OFS (SE), the fiscal witnessed the largest ever mobilisation worth ₹78,731 crore through QIPs from 31 companies, which was 54% higher than ₹51,216 crore raised during FY20. The largest QIP of FY21 was from ICICI Bank worth ₹15,000 crore which singularly accounted for 19% of the total QIP amount. During FY21, QIPs were dominated by banks, NBFCs and real estate companies which collectively accounted for ₹66,141 crore, or 84% of the total QIP amount. Beyond the traditional capital raising avenues, InvITs and ReITs saw a phenomenal annual increase of 1,353% in FY21 at ₹33,515 crore compared to ₹2,306 crore during FY20.
As far as rights issues go, FY21 proved to be a blockbuster year as an all–time high mobilisation of ₹64,256 crore was achieved, which was 15% higher than FY20’s ₹55,998 crore. However, this feat was primarily accomplished on the back of a single issue—the ₹53,124 crore rights issue of Reliance Industries (RIL). By number of issues, FY21 witnessed 20 companies using the rights route in comparison to 13 companies in the previous fiscal.
Unlike equity capital raises, the public bonds market saw a near 31% annual decline with 18 issues raising ₹10,488 crore during FY21, in comparison to 35 issues raising ₹15,146 crore in FY20. The largest issue of FY21 was from PFC, raising ₹4,429 crore.
However, the amount raised through debt private placement reached an all–time high of nearly ₹7.03 lakh crore as on March 26, which was a little over 4% higher than ₹6.75 lakh crore in FY20. While the aggregate FY21 mobilisation was from 656 institutions and corporates, the highest debt private placement mobilisations were by NABARD (worth ₹59,072 crore), followed by REC (₹50,370 crore), HDFC (₹49,843 crore), NHAI (₹44,953 crore) and PFC (₹40,966 crore).
Overall, primary markets’ data clearly points out that the highest–ever public equity market fundraising has defied the pandemic.