The Hindu Business Line : Enam cautiously optimistic on IPO market

Mr Vallabh Bhansali of ENAM Securities says the year 2006 may see some cautious optimism in the primary market and one can expect more market reforms from the Government.

Excerpts from CNBC - TV18's exclusive interview with Mr Vallabh Bhansali:

Do you think we will see a very different primary market for the remaining part of the year?

I think it would definitely be different. Last year we started with a steady market and the market rose to great highs, so did the primary market issuance. This year we are starting with the Reliance issue and then there is a lot of caution in the market. So I think it will be a very good year for the primary market because we will have caution and we will have cautious optimism. I always liked that.

What is it that you expect to see in the primary market in the next few months?

The pricing in a book-building system is always related to the current prices in the market. Therefore, there is no choice but to be market driven. Since the trend in the market earlier was rising, it was natural for the issuers to expect a higher price than those prevailing and therefore, they were offering no discounts or very low discounts to current listed prices. But once the trend is uncertain or even falling, I think those companies that see making the IPOs as a strategy imperative, will definitely be happier or happy to offer bigger discounts.

Overall, do you see less paper hitting the market in the last six months because a lot of companies had planned up some dilution plans, whether through FCCBs or QIBs etc?

I think it is a little early to say because one has to see how the secondary market shapes up. One has to recognise that at least a part of the meltdown was a part of the global process where everywhere the markets fell 10-30 per cent on an average, and so this might not be only an India story. But the cyclical pressures are here and if this market remains flattish, we will see a fair amount of paper issuance. But if the market goes down for any reason after hitting a new peak, then we willhave some trouble.

I would say that given the commitments that companies have made to capex plans, given the fact that SEBI rules have made GDR and other issues outside the country a little more difficult, I think the prospects for the primary market remain pretty decent.

There has been some speculation on whether to tweak the retail component of the IPO market , either to suggest the ceiling in terms of personal incomes or to toy with some kind of a lock-in Where do you stand on that?

I think one has to keep the rules very simple. We have to allow easy exits, easy entries, because if we create too many rules, although sometimes our intentions are good, they don't work well. I would say, take corrective action where it is required.

Do you expect there to be a difference in terms of the size of participation across categories, whether it is HNI, Institutional or retail?

There has been some tweaking in this area in the past and that is okay because it has not reached the limit and regulators in the government may have their reasons to tweak the limits one way or the other. Generally, my view is that India is fortunate in terms of having a large retail market and we should do everything to make that grow. But otherwise, we can probably continue to experiment the limits, if we feel comfortable about that.

Do you think we are closer to fair value now?

I think markets are definitely fairer and that is mathematical. Whenever investors have caution in their thinking, it is generally okay because there is a cap on prices then. As the time elapses, valuations become much more attractive because next year's earnings are on the horizon. So from that point of view, one has to worry for some sectoral changes such as what happens to commodities, what happens to the impact of commodity prices on product companies and so on. But I think, we are in the comfort zone and the market seems to be finding a trading zone at this point of time, which is a very healthy thing. We need a time-wise correction from now onwards, rather than a price-wise correction.

More Stories on : Interview | IPOs | Financial Services

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
SRF up on buyback price buzz

IDBI Capital offers phone-based trading

HC rejects Dinesh Dalmiya bail plea

Jet Air fails to hold on to gains

Stewarts & Lloyds: Betting on orders

Bulls prevail

Sensex continues upward trend

Have lowered exposure to India: Oppenheimer

Enam cautiously optimistic on IPO market

`Disinvestments increase liquidity in markets'

Frontline stocks maintain positive breadth

Blue Bird files IPO prospectus with SEBI