Note ban fallout: Companies call off IPOs as economy slows

Amid signs of the economy slowing, several firms have called off their initial public offerings (IPOs).

Green Signal Bio Pharma, a Tamil Nadu-based company, recently cancelled its IPO after it failed to get enough bids. Vodafone, which was scheduled to bring out India’s largest ever IPO at ₹16,500 crore, has deferred the issue to the next fiscal. Matrimony.com, a matchmaking portal, postponed its IPO due to weak market conditions.

The above trend indicates that companies have turned cautious, what with the growth projection down by almost 2 percentage points.

Companies that had finalised primary issues were encouraged by capital market fund raising in 2016, the highest since 2010. However, the uncertain market environment following demonetisation, has put paid to those plans.

Vodafone, India’s second largest mobile phone carrier, had aimed to raise close to ₹16,500 crore. But they put their plans on hold till next year after Reliance Jio reportedly started a price war.

“Fresh investment can happen only in a conducive climate,” says Girish Nadkarni, managing director at Motilal Oswal Investment Advisors.

“As it seems, things will take time. They need to normalise first. At this stage, conditions don’t look so great for the primary market.”

Matrimony.com, which was planning to raise ₹550 crore via an IPO, has also postponed its plans, citing weak market conditions.

Market regulator Sebi’s approval for the issue will expire this month and it will then have to seek fresh consent.

Crisil said the note ban would impact GDP growth by 1% in 2016-17. The RBI too lowered GDP growth forecast from 7.6% to 7.1%.

“Fund raising via IPOs was the highest this year since 2010, but not much fresh capital is being raised,” said Pranav Haldea, managing director, Prime Database, which tracks primary market activity.