After a 100 per cent success ratio in the last six months, the initial public offer bandwagon is revving up for big action.
Some Rs 22,000 crore (Rs 220 billion) worth of IPOs are set to be rolled out over the next 12 months, giving investors non-stop options.
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Rs 22,000 crore worth of IPOs are set to be rolled out in the next 12 months The six equity IPOs this year are commanding a total market cap of Rs 12,839 crore Big media companies planning IPOs include TV Today, NDTV, Sony and B4U |
Says Vivek Seth, country head, Birla Global Finance, "Investors will have an opportunity to enter the IPO market almost once a fortnight."
If things pan out as planned, 2004 promises to be a record year, with collections beating the previous (1994-95) record of Rs 13,312 crore (Rs 133.12 billion). In the first six months of this financial year, Rs 1,868 crore (Rs 18.68 billion) was raised through public issues, both debt and equity.
The six equity IPOs in the market this year are now commanding a combined market capitalisation of Rs 12,839 crore (Rs 128.39 billion), creating shareholder wealth of Rs 7,795 crore (Rs 77.95 billion).
"With companies looking to cut costs aggressively, managements are looking at raising equity as the stock market has been showing signs of improvement," Icra Executive Director Amul Gogna said.
Echoing the sentiment, CARE Executive Director D R Dogra added that pharmaceutical, IT, BPO and petrochemical companies, among others, were eyeing the capital market.
Besides, steel and automobile companies looking at expansion possibilities are also gearing up for equity offerings.
Leading the pack of companies that are eyeing IPOs are entertainment and media industry firms. TV Today Network, which currently houses two channels -- Aaj Tak and Headlines Today -- has already announced plans to enter the market on Thursday.
The other big media IPOs in the pipeline include NDTV's Rs 600 crore (Rs 6 billion) issue and Rs 100 crore (Rs 1 billion) each from Sony Entertainment and B4U. Superstar Amitabh Bachchan is drawing up plans to tap the primary market to raise Rs 100 crore for AB Corp.
Other big offerings in the pipeline include Patni Computer's Rs 350 crore (Rs 3.5 billion) issue, Bank of Maharashtra's Rs 200 crore (Rs 2 billion), Dena Bank's Rs 80 crore (Rs 800 million), Petronet LNG's Rs 200 crore, Texmaco's (rights issue) Rs 200 crore, and Securit Saint Gobain's Rs 25 crore (Rs 250 million). Besides this, Punjab National Bank (Rs 250 crore), National Fertilizers Ltd (Rs 500 crore), NHPC (Rs 500 crore), NTPC (Rs 400 crore), IBP (Rs 400 crore), Centurion Bank (Rs 65 crore), Central Bank of India (Rs 300 crore), Punjab & Sind Bank (Rs 100 crore), Mahanagar Gas (Rs 150 crore), ICICI Infotech (Rs 60 crore) and Gail India (Rs 200 crore) are also slated to enter the market.
Ajay Sondhi, vice-chairman and managing director of Kotak Mahindra Capital Investment Banking, says that profitable and well-known companies are entering the market now.
Narayan S A, managing director of Kotak Securities, says, "A good thing about the new offerings is that the extra market capitalisation contributed by the new offerings will help to distribute the concentration of holdings in existing stocks and this will reduce volatility in these stocks."
Investment bankers are confident of oversubscription in most cases -- indeed, the mark of a good investment banking house now is not how many issues it can bring to the market but the performance of issues post-IPO.
But not everyone is as sanguine. Prithvi Haldea, managing director of Prime Database, which monitors IPOs, "The primary market is yet to recover from the bad experience of the mid-nineties, compounded by the losses incurred in most IPOs of the previous three years and the securities scam of 2001. All of this has made investors prefer the safety of debt to equity."
But thanks to a buoyant secondary market, the six IPOs this year are quoting at hefty premia to their issue prices. Maruti Udyog has been the biggest gainer in the six months since it listed in June at Rs 125. It is now quoting at Rs 357, up 186 per cent.
The UCO Bank scrip has gained 48.75 per cent since it listed at Rs 12 and the BAG Films par-issue scrip has gained 35.10 per cent to Rs 13.51. With such gains under their belt, investors seem to be sniffing more profits in the coming IPO season.
