The latest hike in key short term rates by the Reserve Bank of India will further dampen the already dull environment for both initial public offerings and follow-on public offer, said market experts.

“The rate hikes will have an indirect impact. It will impact the secondary market and to that extent will be a dampener,” said Dr S Subramanian, Head of Investment Banking at Enam Securities Pvt Ltd.

Those issuers who are determined to go ahead with their offerings will have to scale down valuations. And those to whom valuations are more important will postpone their issues, he said.

The secondary market will be affected and the primary market is only a function of the secondary market, agreed Mr Jagannatham Thunuguntla, strategist & Head of Research at SMC Global Securities Ltd. “This will push issuers back to the drawing board. Currently there is absolutely no interest in the market for absorption of offerings.”

The rate hikes should not strictly affect the raising of money, but market conditions are not conducive at all, said Mr Arun Kejriwal who heads Kejriwal Research and Information Services. “The ONGC FPO has been postponed so many times, there is no clarity on when it will happen. FPOs anyway cannot be all that attractive as the price is already discovered and the market can at the most look forward to a 5-10 per cent discount to market price.”

But there are no big interesting IPOs either, he added: “It will be very tough for the Government to meet its target of Rs 40,000 crore through divestment this fiscal.”

Around 100 draft prospectuses for primary market offerings have been filed with SEBI; these include both those which have been filed and approved as well as those that are awaiting approval, according to Mr Prithvi Haldea owner and head of Prime Database. “The pipeline is strong, but the independent of the rate hikes too, the market is in a bad shape as far as primary issuances go.”

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