Prime Database MD sees larger amounts being raised

Deeptha Rajkumar

Retail investors have never had it so good with most of the issues quoting at premiums to the offer prices.

Mumbai, Dec. 14

The calendar year 2006 saw more than 70 companies hitting the market to raise more than Rs 20,000 crore through equity offerings against almost Rs 10,000 crore raised by 53 companies in 2005.

And this is just for starters, say industry watchers.

"There is a significant amount of money waiting to find its way to good investment opportunities," said Mr Prithvi Haldea, Managing Director, Prime Database.

He said while the Indian economy was still small in terms of listed regime, fundamentals remain good.

"With the quality of markets improving dramatically and the huge amount of due diligence being done by the stock exchanges and SEBI, we may be seeing fewer issues coming to the market compared to the 90s, but larger amounts are being raised. In fact, once power, port or road projects really take off we could be looking at almost Rs 50,000 - 60,000 crore being raised via the capital market route," he added.

Given the quantum of money raised being on the upswing, retail investors have never had it so good with most of the issues quoting at premiums to the offer prices.

Mix of issues

"We have seen a good mix of issues large-cap to mid- to small-cap across various sectors," said a senior official with a leading domestic brokerage. A section of the market, however, expressed concerns over liquidity.

Some opine investors are selling in the secondary markets for subscribing to issues in the primary market. Industry experts, however, believe otherwise and maintain there is no churn in the market in terms of liquidity.

"The market breadth has improved substantially. We have seen existing FIIs increase their investments across all sectors (listed and IPOs) and a lot many new FIIs are coming in. The difference is in that till now we have seen more of opportunistic gains but now Indian companies have taken transactions to US investors. As such, one can see overall improvement in liquidity," said the Vice-President, Equity, of a leading domestic brokerage.

"IPOs are not hurting the secondary market," said Mr Haldea. He also does not subscribe to the theory that "liquidity is drying up."

"The two are not linked. Given our market breadth, there is huge appetite and enough money to subscribe to these issues," he added.

Industry experts maintain that given the levels today, a lot of private equity investors are sitting on good exiting opportunities.

Going forward, sources predict Government could potentially be a large source for the IPO market.

While the going looks good, with the capital market all set to witness a surge in equity offerings (including some of the largest ever) in the new calendar year, market participants highlight one salient feature by which to validate an issue.

"The retail investor needs to look at the QIB subscription. If the response is overwhelming, it is a clear indication of the quality of the issue," said Mr Haldea.

(This article was published in the Business Line print edition dated December 15, 2006)
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