BOMBAY, 3 December — Once upon a time, there were two markets in India — the primary market or the IPO market and the secondary market. And both were booming markets and all made merry and lived happily.
Indeed looking at the state of the Indian public offerings (IPOs) market today, it seems that the past was a fairy tale. In the present day, the IPO market is as good as non existent. Talk about public offering and you are likely to be jeered and ridiculed at.
In the first eight months of the current financial year, only two IPOs hit the market, raising a piffling Rs.60 million. The two issues were floated by Ador Powertone and Saven Techno. This is the worst-ever performance of the primary market which was affected by the acute nervousness after NASDAQ’s crash in April this year.
During the year, 43 companies have received the Securities and Exchange Board of India (SEBI) approval to collectively raise Rs.18.07 billion.
They include Punjab National Bank (Rs.3.20 billion), Eskay K’n’it (Rs.3.00 billion), Future Software (Rs.2.00 billion), Godrej Sara Lee (Rs.2.00 billion), South Asian Petrochem (Rs.1.80 billion), Mahindra British Telecom (Rs.1.00 billion), UTV Software Communications (Rs.1.00 billion), Applitech Solutions (Rs.980 million) and Manipal Media (Rs.350 million).
It is not only the IPO market which has been affected; even the right issue market seems to have dried up.
There were only four right issues which hit the market during the half year ended September ‘01 compared to 12 issues during the corresponding half of the previous year. Funds raised by the 4 companies, however, were substantially higher at Rs.7.37 billion (compared to Rs.3.50 billion by the 12 companies) thanks to Telco’s Rs.6.720 billion issue. The auto major, which had earlier announced an issue size of Rs.13.07 billion, pruned the size by nearly 50 percent due to bad market conditions as well as poor corporate performance. The other issuers in the period were Alok Industries (Rs.510 million), Dalmia Cement (Rs.80 million) and Dharamsi Morarji Chemical (Rs.70 million).
But now, like a dormant volcano slowly showing signs of a revival, some life is once again being seen. According to merchant banking sources, at least three companies are contemplating equity issues over the next few months and another three are planning to shrug off the dust that has gathered on their issue proposals.
Bharati Tele-ventures is expected to be through with its book-building issue in January. Infact the IPO of Bharti would be quite a big one. The company has filed a draft offer document with SEBI for a public issue of 185.3 million equity shares of Rs.10 each through 100 percent book building process.
Companies like Nimbus Communications, Paras Pharmaceuticals, Datamatics Technologies, Western Outdoor Media, Divi’s Laboratories and Radiant Software are expected to revive their plans for IPOs.
Significantly, according to the Delhi-based Prime Database, another 375 companies have publicly announced their intention to collectively raise over Rs.210.00 billion. This list includes prominent companies with mega issues like Tata Consultancy Services (which is said to be looking at a Rs.10.00 billion offering), Amitabh Bachchan Corporation , I-Flex Solutions, Jyothi Laboratories, Kuoni Travels, LG Electronics, Microland, New Delhi Television and Shantha Biotechnics.
Issues are also being planned by several banks like Bank of Maharashtra, Canara Bank, Nedungadi Bank, Punjab & Sind Bank, State Bank of Patiala, Union Bank of India and United Bank of India. And what would be the scene in the rights issue markets? During the second half of the current year, no major trend is likely to be witnessed, according to Prime Database, India’s leading data provider on IPOs. Only three right issues Gammon India (Rs.190 million), Arvind Mills (Rs.750 million) and SKF Bearings (Rs.880 million) have hit the market since October. There are three more companies which have received SEBI approval but are yet to come out with issue. They are Omax Autos (Rs.40 million), R K Ispat (Rs.30 million) and Tata Investment Corporation (Rs.330 million).
