In 2019, a significant decrease was noted in the funds raised through Initial Public Offering (IPO), with the total amount standing at Rs 12,362 crore. This represents the lowest sum since 2014 when companies managed to raise only Rs 1,201 crore through IPOs. However, the amount of funds generated through Offers-For-Sale (OFS) and Qualified Institutional Placements (QIPs) in the same year showed an increase compared to 2018. Additionally, the overall sum collected through Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (ReITs) recorded a 127% growth compared to the previous year.
Initial Public Offering
The Initial Public Offering, or IPO, is a method through which securities are sold to the public within the primary market. The primary market handles newly issued securities and is often referred to as the new issues market. It differs from secondary markets where already existing securities are bought and sold. IPOs occur when unlisted companies—those not listed on a stock exchange—either issue fresh securities or make an offer for sale of their current ones, or both, for the first time to the general public. This strategy is frequently used by budding and medium-sized enterprises that seek funds to develop and expand their operations.
Offer For Sale
OFS involves selling securities not directly to the public, but through intermediaries such as issuing houses or stockbrokers. In this situation, the company sells securities en bloc at an agreed price to brokers who then resell them to investors.
Qualified Institutional Placements
A QIP is a method utilized to raise capital where a listed company can issue equity shares, convertible debentures, or any other security, barring warrants, that can be converted into equity shares. This private placement method allows a listed company to issue shares or convertible securities to select investors. However, only institutions or Qualified Institutional Buyers (QIBs) can participate in a QIP issuance. QIBs include entities such as mutual funds, domestic financial institutions like banks and insurance firms, venture capital funds, foreign institutional investors, etc.
Infrastructure Investment Trust
An InvIT is akin to a mutual fund and functions as a collective investment scheme. It allows for direct investment of money from individual and institutional investors into infrastructure projects, promising a small return on the income. InvITs are under the regulation of the SEBI (Infrastructure Investment Trusts) Regulations, 2014.
Real Estate Investment Trust
ReITs are securities connected with real estate that can be traded on stock exchanges once they are listed. They have a structure similar to that of mutual funds and include sponsors, trustees, fund managers, and unit holders. Unlike mutual funds, ReITs invest in physical real estate, with the collected money being utilized in income-generating real estate. This income, in addition to the regular income from rents and leases and gains from real estate appreciation, is distributed among the unit holders.
| Fundraising Method | 2019 Fundraising (in Rs Crore) | 2018 Fundraising (in Rs Crore) |
|---|---|---|
| IPO | 12,362 | 30,959 |
| OFS | 26,438 | 22,096 |
| QIP | 51,216 | 28,429 |
| InvITs | 20,324 | 10,220 |
| ReITs | 4,750 | 3,500 |
Fundraising Figures Overview
The above table illustrates the contrasting performance of different fundraising methods in the years 2018 and 2019.
