IPOs worth Rs 7,000 crore waiting on sidelines

Written by Ankit Doshi | Mumbai | Updated: Dec 4 2012, 07:34am hrs
With the secondary market in full throttle and the government having actively begun its disinvestment programme, the coming months could see more than two dozen companies hitting the capital market with their initial public offers (IPOs).

According to data from Prime Database, as many as 28 companies that would cumulatively raise R7,000 crore are waiting on the sidelines with an approval from the Securities and Exchange Board of India (Sebi). The Sebi approval for an IPO is valid for an year.

Of the total 28 companies, two companies (Trimax IT & Infrastructure Services and CRP Technologies) have their approvals valid until the third week of December and could potentially raise R280-300 crore this month, in addition to R5,500 crore that Bharti Infratel, Care Ratings, PC Jeweller, and Veto Switchgears jointly intend to raise in the first two weeks of December.

Further, seven companies have their approvals valid between January and March 2013 with an intention to raise nearly R800 crore. The remaining 19 companies have their approvals valid between April and October 2014. Meanwhile, an additional 17 companies, which are cumulatively planning to raise R5,200 crore, are awaiting Sebi approval after filing their offer documents.

Investment bankers say many issues are moving into the pipeline and companies are taking initiatives to launch their IPOs to take advantage of the recent rally in equities. The up-move in Indian equities, as a result of the governments reforms and easy liquidity from QE3, has helped re-build investor confidence and provide cushion to IPO pricing.

IPOs did not perform well due to a direct correlation with the secondary market...Valuations remained a concern. However, market sentiment is showing signs of revival and it is an opportune time, in our view, for companies to tap the primary market, said an official at IDBI Capital, which is one of the lead managers to Care Ratings and PC Jeweller.

He added that beginning of government's disinvestment programme also boosted the confidence of those waiting to tap the primary market.

It is widely believed that the response to Bharti Infratel and a couple of other issues that would open in the coming days would be keenly watched by companies waiting on the sidelines.

A lot is at stake with the Bharti Infratel IPO. If the issue gets good response, it could set the tone for other IPOs in the near future, said Prithvi Haldea, CMD, Prime Database.

Last week, Indian benchmark indices touched their highest levels since April 2011 and dollar inflows from FIIs crossed $20 billion the second-highest in 14 years.

Due to poor retail participation, primary market offerings in the first nine months of CY12 touched the lowest level since 2003. More than 25 companies (willing to cumulatively raise nearly R9,000 crore) pulled out of the primary market, despite having Sebi approval in hand. Overall, more than 55 issues (worth nearly R50,000 crore) have been called off since the beginning CY11.