Chetan Savla, Executive Director and Head of Equity Product Group of Kotak Mahindra Equity said looking at the Q1 of this calendar year, upwards of Rs 14,000 crore was raised in the IPO market and slightly above Rs 3,000 crore was raised through QIPs.

He added that most of this was again in the first half of that quarter itself and the current quarter has been relatively dry. He stated reasons- one is there was a little volatility in the market in March and April and after that there has been the results season after which a lot of issuers are probably waiting to see that kind of volatility go down before hitting the markets

Excerpts from CNBC-TV18's exclusive interview with Chetan Savla:

Q: How is the pipeline looking right now, comparing the IPOs the current quarter with what was raised in the last quarter and how deep is the cut?

A: If you look at the Q1 of this calendar year, then upwards of Rs 14,000 crore was raised in the IPO market and slightly above Rs 3,000 crore was raised through QIPs. Most of this was again in the first half of that quarter itself. But this current quarter has been relatively dry. There are couples of reasons. There was a little volatility in the market in March and April, followed by results season. A lot of issuers are probably waiting for volatility to go down before hitting the markets. Of course the pipeline in terms of transactions is as robust as it was for the last year and approximately USD 40 billion of capital has been raised from India through various sources of primary markets last year. In terms of demand for capital in the primary markets, it is coming from infrastructure, engineering and construction, real estate and from energy utilities. There are also some of the older sectors like pharmaceuticals, media and entertainment, which are looking to raise money this year. There is a significant demand for capital in the market.

Q: Do you think investor expectations are getting moderated, realistically if you have to do some crystal ball gazing? Do you think USD 40 billion will be achieved in the next 12-months?

A: The only thing that goes against that expectation is the time for raising capital and time is a perishable commodity. So during the Q1 of this financial year and probably in Q2, the momentum may not be as fast as it was last year. But we expect that the second half to be very robust and fast. If you have not seen more than 4-5 transactions closely in a week or even when holiday seasons like Christmas etc is on, then it may be difficult to achieve the total number in next 12 months. But the demand is certainly there. However, this aside, there’s not too much of constrain on QIPs. The average size of transactions has gone up in 2008 versus 2007 and this year will probably see even larger transactions, which may help growth. Of course investors are being careful now. Last year they had assigned less risk weightages and were willing to take a little more risk. Therefore, effectively their expectations about valuation maybe a little gapped with what the issuers would have expected them to give in January or last year. That I guess will be tackled because the need for capital is not going away.  

Q: What is the kind of pipeline you are seeing on QIP deals and also is there a flurry of private equity activity in the deal making space now?

A: In fact both these spaces are getting merged in many ways. There are three routes of raising money - QIP, preferential allotments and private equity. There were many companies who were looking at QIP for fund raising but because there is a floor price below which these cannot be done (as per SEBI regulations). In many of these cases, the actual market price is slightly below the floor price. In those cases issuers have started looking at private equity where the investors are willing to take three-five year view and are happy to give a little premium. The third route is preferential allotment to portfolio investors.  And interchangeably between these three routes, I think money is being raised now.