Business Daily from THE HINDU group of publications
Thursday, Sep 21, 2006
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Business Daily from THE HINDU group of publications Thursday, Sep 21, 2006 ePaper |
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Markets
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Stock Markets Money & Banking - Investment Banking Shailesh Menon
Track record Merchant bankers analyse the quality of management of the company and viability of the offering to investors. Stringent quality standards have forced lead managers to focus on issues falling in profitable and promising sectors.
Mumbai , Sept. 20 Termed as an effort to save gullible investors from fly-by-night operators coming out with IPOs, merchant bankers are imposing more self-checks before taking up public issues. Many have even begun focusing on sector-specific offerings to add quality and credibility to their issue profile. According to lead managers, stale offerings (that even include IPOs of unprofitable companies) and issues "not made in good faith", lower the credibility levels of merchant bankers. Several "hollow issues" in the past (mostly in the mid and late 90s) have adversely affected their gradation and performance track record, they say. "The reputation of a lead manager is heavily dependent on the issue he manages. Only a sound performance track record can make you want for companies planning to come out with IPOs. The whole idea is to dispirit fraudulent companies and unviable concerns from entering the market," said Mr Girish Nadkarni, COO - Investment Banking & Institutional Equity, IL&FS Investsmart Ltd. Among several aspects and antecedents looked into, merchant bankers analyse the quality of management of the company and viability of the offering to investors.
Quality offerings
Stringent quality standards have forced lead managers to focus on issues falling in profitable and promising sectors. "We are focusing on IPOs from companies operating in emerging sectors like food processing, agriculture, textiles and tourism and hospitality. With a focused approach, we can come out with quality offerings that will be a good investment option for investors," said Mr Ananta P. Sarma, Executive Vice-President & Head - Investment Banking, IDBI Capital Market Services Ltd. Lead managers have also begun focusing on sectors such as construction, auto and auto-ancillary, real estate development and retailing.
Larger issue size
As part of its move to add more value to public offerings, several book runners have decided to only manage issues having a considerable size. Many have decided to focus only on issues of mid-cap size companies. A major reason for this shift in strategy is the fact that only large-size issues impress institutional buyers. "Major lead managers have graduated from small offerings to large-sized IPOs. The benchmark now is anything between Rs 100 crore and Rs 150 crore. These limits will keep changing with markets and the economy growing bigger and better," said Mr B. Madhuprasad, Vice-Chairman, Keynote Corporate Service Ltd. Consequent to this, merchant bankers foresee an increase in the scope of private equity funds and VC funds. These funds are expected to hold larger stakes in the small-cap segment.
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