IPO Trend in India: Amid the surge in share sales, India’s Chief Economic Advisor (CEA) V. Ananth Nageswaran on Monday expressed regret that the initial public offering (IPO) is becoming a means of exit for early investors in any enterprise. Due to which the sentiment of public markets is weakening.
Speaking at an event organized by CII here, Nageswaran said the country’s capital markets should grow “not just in scale but also in terms of purpose”.
CEA said this
The CEA also urged to avoid celebrating the wrong benchmarks such as market capitalization or futures-options trading volume. He also clarified that these are not measures of “financial sophistication”, but such efforts “only risk diverting domestic savings from productive investment.” He said that, however, India has succeeded in developing a strong and sophisticated capital market. However, it has also contributed to the “short-term income management approach”. Because they are associated with increases in management remuneration and market capitalization.
In the April-September period, 55 Indian companies have raised about Rs 65,000 crore by issuing IPOs. Most of the shares were issued for sale by existing investors and the amount of new shares issued was very small to provide any benefit to a company.
He said that the country cannot depend primarily on bank loans for long-term financing. The CEA described a deeper bond market as a “strategic necessity” to finance long-term objectives.
Singh, an academician-turned-policy maker, said the Indian private sector has got enough reasons to be cautious and risk-averse. Investment decisions should not be taken as this may turn the strategic constraints facing the country into opportunities.
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