Politicians often fashionably say the stock market is not their concern. But capital markets are also a barometer of economic mood, and since animal spirits affect economic decisions, no government can or should be indifferent to the prospect of improving sentiment. This government is witnessing a long dark mood in capital markets. The Sensex has dropped by around 28% since January this year. So, the primary market has been excruciatingly dull as well. The number of IPOs in the first six months (January to July) of this year was 37 compared with 60 in the same period last year. And of the 37 new issues this year, only seven have reported positive returns. The total amount raised through IPOs in the first seven months of this year is $4.3 billion; $7.7 billion was raised during the same period last year. Last year saw 106 IPOs that mobilised $11 billion, making India the second-largest global market for IPOs. Nearly half of these stocks were subscribed by at least ten times and only three had negative returns at the end of that year. This year, 29 firms, planning to raise Rs 30,000 crore among them, have either withdrawn their offer bid documents or deferred their dates.
This has to change, because economic news headlines need to change, and this is doable. The government, shorn of the Left, can change the mood of primary markets by executing IPOs of PSUs at attractive prices. Some of these companies are quite valuable and profitable and their being on the market will restore investor confidence. About 75 closely-held government companies and banks have evinced interest in diluting their equity. Some of the much-awaited IPOs are for NTPC (which plans to raise Rs 6,000 crore), HPCL (Rs 5,000 crore), Coal India (Rs 3,000 crore), Gujarat State Petroleum Corporation (Rs 4,000 crore) and BSNL (Rs 40,000 crore, which would be the biggest IPO ever). If all of them go through, we are looking at nearly Rs 60,000 worth of offerings in the primary market and, make no mistake, there?s investible surplus here and globally that will be delighted to buy into these issues. If AB Bardhan trashes IPOs of PSUs now, no one will listen. If Manmohan Singh pushes them through, everyone will buy.
