BOMBAY, 21 April 2003 — The IPO (initial public offering) market has virtually gone into hibernation.
In fact, the combined mobilization of the last 5 years at Rs.75.16 billion is nearly 15 percent lesser than even the single year IPO mobilization of Rs.86.86 billion in 1995. We keep on hearing about the various issues that are being planned but very few, make it beyond the drawing board. And the fiscal year gone by, 2002-03 has not been a very good year for the IPOs.
In the entire year, there were only 6 IPOs mobilizing a paltry Rs.19.81 billion, according to a report by Prime Database. This is in direct contrast to the huge expectations that had been built up in the early part of the year, when scores of mega IPOs had been announced in a very short period, aggregating nearly Rs.300 billion.
According to the year-end report, almost half of this mobilization was due to four PSU bank issues (PNB, Union, Allahabad and Canara).
The only two private sector IPOs to hit the market were of Bharti Tele-ventures (Rs.8.34 billion) and I-Flex Solutions (Rs.2.10 billion). The year may appear a huge improvement by amount over the disastrous 2001, which had mobilized only Rs.3.92 billion, but Rs.19.81 billion still remains a very small amount.
Prithvi Haldea of Prime said that the escalation of negative geo-political developments and the uncertain state of the secondary market through the year, coupled with investors’ apathy, combined to act as big dampeners for the revival of the comatose primary market.
In the beginning of the year, there were grandoise plans by various companies to come out with equally huge IPOs. Few amongst them were IOC (Rs.16.00 billion), HPCL (Rs.10.00 billion), BPCL (Rs.10.00 billion) and Gail (Rs.5.00 billion). Nalco (Rs.6.00 billion), Maruti (Rs.8.00 billion), NTPC (Rs.15.00 billion), PFC (Rs.10.00 billion) and Power Grid (Rs.5.00 billion).
The private sector had seen announcements of at least 15 mega issues including TCS (Rs.50.00 billion), B4U Television (Rs.1.00 billion), Idea Cellular (Rs.10.00 billion), Star TV (Rs.5.00 billion), Tata Teleservices (Rs.10.00 billion) and AB Corporation (Rs.2.00 billion).
Out of all these, there are now three companies which have planned to go ahead with their IPOs in the current fiscal, 2003-04. The three IT companies planning to go public this year are Tata Consultancy Services, Patni Computers and Datamatics Technologies.
The TCS IPO is expected to be in the region of Rs.40.00 billion. TCS, which is a division of group holding company Tata Sons, is divesting 10 percent of its equity. The company is contemplating bringing the issue into the market by the end of June this year.
But the promoters, Tata Sons, say that if they do not get the right price, they will wait for better conditions. There is also a feeling that the ripple effects caused by the lower-than-expected guidance from software major Infosys may upset the plans of these three IT IPOs.
Privately-held software and consultancy services firm Patni’s IPO would hit the market after TCS’ public offer. GE (General Electric) and GAP (General Atlantic Partners) are the two foreign investors in Patni.
Apart from the IT IPOs, one more big IPO expected to hit the market this year and eagerly awaited is that of Maruti Udyog, the government owned car making company.
The government will be divesting close to 36 million shares and will be able to garner around Rs.8.30 billion if the issue is placed at the floor price of Rs.230 which was decided earlier in January. The issue was planned for March but due to the war, it has now yet to announce a new date.
Well, this fiscal, due to the war most of the companies have refrained from making any new announcements.
Thankfully, unlike the last fiscal, this year only three to four companies are sure about going public. And even in this, let us see which of the companies make it. But one thing is for sure, whichever companies do make it, it will be an IPO worth waiting for as the companies are all extremely strong companies and would be a treasure to hold in the portfolio. Lets keep the fingers crossed and hope that the comatose IPO market becomes alive again and more importantly, the IPOs that have been announced to see the daylight this fiscal.
