YEAR 2008 For IPOs So Far…
Markets are going through bumpy ride hit by bad news since January 2008. First it was subprime crisis in US that hammered banks heavily across the globe. Second was rupee appreciation, which continues for this year as well, technology and textile stocks knocked down. Third, Inflation, which crossed 6% mark last week, which is above the RBI’s targeted 5% level. Due to which, chances of rate cut are far away, although it is believed that RBI might hike the CRR. Fourth, crude crossed USD 100 mark (touched USD 109 per barrel).
Key Highlights of IPOs and FPOs in the CY 2008
Ø The crash, and the subsequent volatility in the stock market, adversely hit Initial Public Offer (IPO) plans of many Indian companies. The CY 08 saw as many as 21 IPOs in the first three months of current year. Of which, 3 companies namely, Wockhardt Hospitals, Emaar MGF and SVEC constructions had withdrawn the IPOs due to weak market sentiments.
Ø The amount raised by the IPOs so far amounts to INR 165.72 bn. The year has not seen any Follow-on Public Offer (FPO) so far.
Ø Of the 14 listings 6 IPOs (42.86%) managed to debut with marginal premiums. However, last calendar year in the same corresponding period 17 (47.22%) IPOs, of the 36 listings debuted at premiums.
Ø The fortune of the primary market is closely linked with that of the secondary market, and there is a lag affects on the number of issues hitting the market and their listing premium vis-à-vis the sentiments of the broader market.
Ø The subscription levels also impact the returns of the investors of various categories. The QIBs also did not give a good response to the issues that came, apart from the two big issues that of Future Capital and Reliance Power. These two IPOs witnessed a subscription of 180.72 times and 82.61 times respectively. In case of Rural Electrification Corporation also, the QIB portion got subscribed 39.30 times.
Ø Talking about the NIB category, the maximum subscription seen in this category was in Reliance Power IPO (190.02 times). In the remaining IPOs this category just managed to get subscribe fully.
IPO Snapshot 2007
Ø The year 2007 had been another blockbuster year in the history of Indian IPO market with total capital raised reaching a whopping INR 442 bn from 96 IPOs and 3 FPOs over the year. This number surpassed the previous year’s amount of 190 bn and is the highest till date beating the earlier high of INR 305 bn in 2004.
Ø The year saw the largest issue of DLF with issue size of INR 92 bn.
Ø Interestingly, the IPOs were not concentrated to a few industries, but spread across the board with companies from 14 different industries.
Ø 16 construction companies contributed to the total of 108 IPOs that came in the CY07, raising approximately INR 151 bn as against INR 36.5 bn last year through 10 IPOs.
Ø 45 companies, out of 108 IPOs comprised of various mid-sized industries including that of agronomic seed industry, auto components industry, piping & plumbing, paper industry, gems & jewellery, etc. The issues were of small size but as the amount raised by the companies comprised of INR 63 bn.
Ø 3 companies came out with FPOs this year compared to 20 companies in 2006. However, the absolute amount raised through FPOs increased significantly from INR 45 bn in 2006 to INR 105 bn. FPOs (as a proportion of total funds mobilised) declined to 24% from 31% last year.
Ø 22 IPOs in 2007 were oversubscribed by over 50x with the highest over all oversubscription of 160x in Religare Enterprises.
Ø DLF was the largest IPO in 2007 mobilizing INR 92 bn and ICICI Bank came up with the largest FPO of INR 100.5 bn. It was RPL in 2006 that came out with the biggest IPO for INR 27 bn and Bank of Baroda with the largest FPO of INR 16.3 bn.
Ø The highest listing gain of 242% was witnessed in Everonn Systems India with over all over subscription of 144x, while the worst listing was seen by Broadcast Initiatives, at a discount of 41%.
Ø Orbit corp, Everonn Systems, and MIC Electronics, have created the maximum wealth for investors in 2007 while, Abhishek mills, House of pearl fashion, and Asahi Songwon Colors eroded maximum wealth.
2008: THE ROAD AHEAD
2008 is expected to see much action scheduled to take place in the primary market. As per sources, the issues pending with SEBI and other mega issues that are in pipeline are around 485 (nearly 419 IPO and 66 FPO). The primary and secondary markets are highly interdependent. The secondary market conditions play a significant role in the over-subscription and the listing premium that a stock commands. At the same time, Mega IPOs that suck liquidity from the markets at times result in lack of buyers/support in the markets. Surely, there are several pros and cons associated with the mega IPOs and FPOs. With the Indian economy growing at an average real GDP rate of around 8% p.a., many mid-sized businesses from different sectors have grown manifold. There has been a paradigm shift from a human intensive business to capital intensive business. Such an expansion in the scale of business certainly accentuates the requirement for funds. One can expect many IPO’s with few big ones being Jai Prakash Power Ventures Ltd. (INR 40 bn) and National Hydroelectric Power corp ltd. (INR 22 bn). Few other mega IPOs include BSNL and Sahara Infrastructure & Housing Ltd. In CY 08 mega FPO (rights issue) of INR 120 bn by State Bank of India is awaited. Other PSUs that are expected to come up with issue of shares (fresh issue or divestment or both) during the year include NTPC (INR 60 bn), HPCL (INR 50 bn), Coal India (INR 30 bn), and Gujarat State Petroleum Corp Ltd. (INR 40 bn).
