Dec 2012, the kindest month for equity issues
According to stock exchange data, the sale of 10% stake in state-owned NMDC raised nearly Rs 6,000 crore. The IPOs of Bharti Infratel, CARE Ratings and PC Jeweller raised a combined R5,600 crore while the OFS of Honeywell Automation, Reliance Power, Eros International and STI India raised an additional R1,650 crore.
Investment bankers and primary market experts attribute the pick-up to the government’s stake sale initiative as well as the buoyancy in secondary markets following a burst of reforms.
December is usually a sluggish month for markets. “Institutions and investment bankers are busy closing their books and preparing fund-allocation for the forthcoming year. It is also holiday time for global institutions,” said an SBI Capital Markets official. However, the government’s reforms initiatives to address the twin-deficit problem and boost economic growth revived sentiment in secondary markets, the official said.
Stock exchange data show that an additional R1,000 crore could be raised through public issues in December. The Adani Enterprises OFS, which hit the market Friday is expected to raise around R650 crore. The company has proposed to offload 2.30 crore shares at a floor price of R282 apiece.
Experts also attribute the fund-raising to attractive pricing and timing.
“The markets did not perform well in the first eight-nine months of the calendar year and opportunities to raise capital were limited. However, once the secondary market sentiment improved due to fiscal reforms, many companies rushed to capital markets to take advantage,” said Dipen Shah, head of private client group research, Kotak Securities.
According to PRIME Database, December 2011 did not see any public issues. Companies raised a little over R1,500 crore through five issues in December 2010 and R3,500 crore through three issues in December 2009. There was no equity fund-raising in December 2008 as the global financial crisis roiled the markets.
Several issues are in the pipeline for the next two-three months. Experts feel the fund-raising party will continue as many big institutions, especially FIIs, have been re-allocating funds to Indian equities on hopes the government will continue with reforms.
“If the sentiment deteriorates, the public issue pipeline could be disturbed. We expect the secondary market mood to sustain,” said Prithvi Haldea, CMD, PRIME Database.
According to Bank of America-Merrill Lynch’s December fund manager survey, confidence in global economy will extend to 2013. It said global markets would strengthen next year as fiscal cliff fears ease. UBS and JP Morgan too are bullish on India, expecting markets to outperform next year.
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