Riding on global liquidity IPOs to boom in 2010

Even state-owned companies are expected to be active next fiscal

With uncertain times, initial public offers (IPOs) of equity shares by companies were also badly hit. But as the stock markets bounced back in 2009, IPOs too staged a smart come back. There were about 20 IPOs in 2009 raising funds to the tune of Rs 19,000 crore. Good news is that the present bullish trend may continue next year  and 2010  is likely to see a much larger interest in the IPO market. There are clear indications that IPOs will raise more money in 2010 as an impressive list of corporates have started the IPO process for raising funds in the first quarter of 2010.

There are about 5 companies with approvals in hand from Securities & Exchange Board of India (Sebi) aiming to raise about Rs 307 crore. There are also about 41 companies who have filed prospectuses for IPOs and are awaiting Sebi approval. According to Delhi-based SMC Capitals, these IPOs are likely to raise an amount of Rs 28,532 crore.

Among IPOs in the pipeline are Reliance Infra Tel Rs 5,000 crore), Emaar MGF (Rs 3,850 crore), Sahara Prime City (Rs 3,450 crore), Sterlite Energy (Rs 3,000 crore), Lodha Developers (Rs 2,500 crore), Jaypee Infratech (Rs 1,650 crore) etc. Interestingly, there seems to be a renewed interest in the primary market from small companies as the list shows that of the 42 IPOs in the waiting, 30 are from small companies with average IPO size below Rs 500 crore. SMC Capitals Equity Head Jagannadham Thunuguntla said “the renewed activity in the IPO market is a reflection of the hope of Indian economy returning to higher growth path.”

In the pipeline
Recent growth data on GDP and industrial production, also shows that the economy is expected to do much better in 2010. The IPOs in the pipeline also show that realty companies are expecting a turnaround in their future as four prominent realty companies are hoping to raise big money. Prominent among them are two Bangalore-based companies Prestige Estates and Nitesh Estates, planning to raise Rs 972 crore and Rs 360 crore, respectively. After the realty stocks took a major beating in the last two years, it will be interseting to see if investors will flock to buy new realty shares.

Even the government-owned companies are going to be very active in the IPO market in 2010. As per the PSU disinvestment programme, the central government is expected to sell PSU shares to raise rs 25,000 crore in 2010-11.
While the offers galore, will there be many takers for IPOs? Merchant bankers and analysts believe that there is plenty of money in the Indian capital market to lap up good issues. The banking system and mutual funds are flush with funds and foreign institutional investors (FII) are also pouring in money. Massive stimulus packages offered by the governments in the developed countries have led to huge cash pile with the FIIs, but due to low rate of interest and poor return from stocks in their countries, their fund is flowing to emerging economies including India.

India saw a net inflow of $ 17 billion (Rs 78,000 crore) in the April-November 2009 as against a net outflow of $ 3 billion (Rs 13,500 crore) in the January-March 2009 period. As the Indian rupee has remained stable against dollar and economy is looking much better, flow of foreign funds into India may continue to be good. May be it is time for IPOs to tango in 2010.
DH News Service