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Given the Government going all guns blazing on reforms and the market sentiment improving, the initial public offering market pipeline, which had long dried up could see a revival soon enough, according to analysts and investment banks.
Merchant bankers who have started experiencing a sudden spurt in enquiries from corporates to initiate the paper work for the IPOs state that about a dozen IPOs offers can be expected by September end.
Big IPOs to hit market
These interested corporates include mid-cap companies with a potential market cap of Rs 600 crore to Rs 1,000 crore and several public sector companies, which are hoping to take advantage of the newly introduced fast track method by the SEBI.
“For the last two to three weeks we have received a spurt in enquiries from companies interested to talk about taking their IPO and we are in advanced stages of filing the paperwork for their IPOs. If the present stability in market continues and Government continues to march forth on the reforms front, we could see at least a few big IPOs hitting the market before the end of the year,” said Mr Dara Kalyaniwala, VP, Investment Banking, Prabhudas Lilladhar.
“Every year September end sees feverish filing for IPOs as March 31 is the deadline for the expiry of the set of audited six monthly company accounts which have to be submitted as part of the DRHP. The market’s present positive sentiment is an added boost,” he added.
Strategist & Head of Research SMC Global Securities, Jagannadham Thunuguntla, said: “Many of these companies had already acquired the necessary approvals and were waiting in line to time the market for their public issues. Now since the market sentiment has improved the IPO prospectus filing activity would pick up.”
Bharti Airtel’s mobile phone tower unit Bharti Infratel has already filed the prospectus for its IPO last week and could raise $1 billion in the country’s biggest IPO in over two years since State run Coal India raised $3.5 billion in 2010.
Pricing is the key
With markets being subdued and companies shelving their share sale plans this year, Indian companies raised $7.1 billion from share offerings in the first half of this year, down four per cent from the same period in 2011, according to Thomson Reuters data. Consequently, there have been a few lessons learnt from the same.
“This time investment bankers should keep in mind the lesson that lousy IPOs are not going to work.
“Money is available in the market for good quality IPO if promoters are not sticky about their valuations and leave some amount on the table for investors,” said Mr Kalyaniwala.
Notwithstanding the ONGC stake sale hiccup earlier this year, market watchers are also optimistic of the Government’s disinvestment programme sailing through this time.
Mr Kalyaniwala said: “The Government should be able to mop up its disinvestment target of Rs 30,000 crore by March 2013 though it seems a bit too steep since they are starting in September end. However, the Government is offering stake stale in already listed companies and if it does so at a reasonable discount to the market price, the disinvestment could work.
“The companies cleared by the Cabinet for disinvestment comprise good dividend yields and a consistent track record, which should work in their favour. About 70-75 per cent of its disinvestment target proceeds is achievable.”
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