The Hindu Business Line : PSU IPOs provide better returns: study

NEW DELHI: With a host of public sector firms waiting to enter the capital market, investors have something to cheer about as PSUs, which had come out with their initial public offers in the last five years, have given better returns than their private s ector peers, a study says.

The returns provided by PSUs, which came out with IPOs in the last five years 2004-09, have more than doubled, while their private sector peers gave returns of 3.45 per cent in the same period, according to data compiled by SMC Capitals.

The findings indicate that there exists divergence between the returns of PSU IPOs and private sector peers, with a positive edge to PSU IPOs.

“People have burnt their fingers with the private sector IPOs in the past. Now they would want to reap returns and the investor community will invest in the big-ticket upcoming IPOs,'' SMC Capitals Equity Head Mr Jagannadham Thunuguntla said.

Pricing of IPOs and strong balance sheet makes PSUs better placed than their private sector counterparts.

The government's aim to divest stake in major state-run firms is set to perk up the IPO space, with about six PSUs including Air India, BSNL, Oil India and NHPC, gearing up to sell equity sale in the primary market, analysts said.

“The two IPOs of NHPC and OIL would hold the key to revival of the primary market as foreign investor community would be looking at how the demand shapes up,'' Mr Thunuguntla added. - PTI

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