There was an uncharacteristic sense of hurry to how India Inc went about raising equity this past month. You can see it in the SEBI bulletin: a 220% leap to more than 54,700 crore in equity raised, all but made possible by a multiyear upturn in preferential allotments. It’s a clear case of firms working around some of the geopolitical noise to get their capital plans in order.
With things in West Asia in a state of flux and the primary market not as hot, companies have been opting for the faster, more direct way to put up some cash. According to the regulator, it’s a no-nonsense approach that has kept the overall figures from being dented by the IPO side of things.
Preferential Allotments Drive the Surge
You could call preferential allotments the engine of the month. SEBI puts the increase at 580%, or over 48,000 crore, which is as high as we’ve seen in years. It’s where most of the action in April was and the reason you see the 220% on the surface.
Then there are the QIPs, which have made a comeback. They were up nearly 14-fold to 2,500 crore, a sign that the big institutions are still ready to put pen to paper even if public offerings are in the background.
IPOs Slow, But Not Out
The public offer side of the house didn’t have the same verve as before, though it’s better than last year. We’re looking at Rs 2,493 crore in IPO proceeds – a far cry from the 8,500 crore of the recent past, but nothing like the 255 crore from a year back.
Where there was activity, it was underwritten by the well-heeled. Four mainboard IPOs made up 2,099 crore of the total, and seven on the SME list chipped in 394 crore, showing a bit of an appetite for risk in the right kind of growth stories.
Debt Weakness vs Equity Strength
It’s not just equities that have been on a different track. Debt came in 67% lower at 34,500-odd crore in April, with both the public and private sides down on the month. A clear preference for equity when the market is in a mood to be selective.
Equity has held its ground, though. The Nifty and Sensex were up 6% in April, and the mid and small caps did even better. Power was the top sector at 22.2%, with realty, media, metal and FMCDs not far behind.
Flows and Trading Dynamics
If you look at the institutional side, it’s a bit of a tussle. Mutual fund AUM is up 11% to 81.9 lakh crore, thanks to steady household savings. On the other end, FPIs have been on the sell, with outflows of 70,885 crore.
The way people are trading has changed too. Cash turnover in equities is 36% higher than a year ago, but the speculators have reined in. Derivatives are down 15 to 23% and currency ones 24%. A case of recalibrating.
What it means now
SEBI’s data gives you a read on where the priorities were in April:
– Firms are using preferential allotments to be sure of the deal
– IPOs are being done with an eye on who will take them
– Debt is on the back foot as rates and risk are re-evaluated
– Inflows from within are cushioning the blow of FPI sales
– More volume in the cash market, less in the derivatives
Put simply, the mix shows that for a lot of companies, a negotiated deal is more appealing than a public one. And for the investor, the fact that domestic money is holding the line against foreign exits has been good for prices and for some of the larger private placements.
What you have in the bulletin is an oddity: strong equity, weak debt and a private market that’s woken up. For the time being, preferential and QIPs are in the driver’s seat, while IPOs are being put together with a bit of institutional heft behind them.
The numbers also give you an idea of what to keep an eye on. As long as the cash market is solid and the domestic side is there, the capital can flow through private channels even if the IPO calendar is a little thin. April has shown how India Inc has found a way to keep moving despite the mixed messages from the rest of the world.
