Mahindra Holidays IPO subscribed 9.8 times

Written by fe Bureau | Mumbai | Updated: Jun 28 2009, 02:55am hrs
The overwhelming response to the Rs 301 crore initial public offer (IPO) of Mahindra Holidays and Resorts India Ltd (MHRIL) which was over subscribed 9.80 times by investors to the tune of Rs 2949.8 crore, has lead all eyes on a slew of IPOs that are yet to hit the market.

According to BSE-NSE demand graph, MHRIL issue received bids for 90.83 million shares against the issue size of 9.26 million shares with the bids at the cut off price standing at 8.46 million shares.

In the pipeline, waiting for improved market conditions and budget announcements are 19 IPOs approved by securities and exchange board of India (sebi) with an issue size of Rs 8,959 crore.

To top this, is the new fund-offer, Reliance infrastructure fund by Reliance mutual fund slated to be successful. Estimates suggest the fund could raise Rs 3,000 crore from retail and institutional investors. ICICI Prudential's target fund had set the ball rolling by picking up Rs 800 crore in May 2009. Qualified institutional placements (QIP) too gained momentum this year with three QIP issues raising around Rs 5,000 crore and Rs 40,000 crore more expected to be raised this year. While the success of MHRIL signifies risk appetite returning to the market and hope of revival in the primary market, experts feel that a lot would depend on the stability or volatility in the secondary market. Companies will come out with their public issues when they see signs of stability in the secondary market, said Prithvi Haldea, managing director (MD), Prime Database.

It is a very good beginning, said K Srinivas, MD, Saffron Capital Advisors Private Ltd, adding further that if the momentum in the primary market sustains, secondary market could see a revival. But in the near term, markets will be eying the forthcoming Union Budget where significant amount of public sector undertaking (PSU) divestment is expected.

Market would be watching IPOs from state enterprises and depending on response they get, the private sector would follow, said Srinivas. State owned enterprises like Oil India Ltd and NHPC Ltd have an issue size of Rs 1,400 crore and Rs 2500 crore respectively. Private sector players like Adani Power and Pipavav Shipyard have Rs 2200 crore and Rs 700 crore issues respectively.

Given market conditions, experts argue that only quality IPOs with reasonable valuations and attractive price would succeed among the investors. MHRIL, which got subscribed over seven times, has an IPO grading of 4 out of 5 from Fitch rating agency, indicating strong fundamentals.

With equity markets picking up and staging a smart rally by around 50% since the first week of March 2009 there are concerns regarding sustainability of the current momentum. Issue dates have not been announced by any of the 18 companies that have Sebi approval.

The last two months has witnessed activity in the secondary market, but only two companies have submitted their offer documents with Sebi. Companies are still waiting for clear signs of stability in the secondary market as high bouts of volatility is dangerous for any kind of public issues, said Haldea.