This is despite the fact that there are about 100 active public issue candidates (both private and public sector companies) with a combined issue size of about Rs 22,000 crore. I would believe a revival started when 30 public issue candidates out of the 100 raise at least Rs 10,000 crore from the primary market by the end of the current fiscal.
The two key drivers of a revival in primary market are reasonably priced issues from public sector units hitting the market and shortening the lengthy IPO process, Mr Haldea says.
The capital market regulator and the government should act without losing time. The government on its part should make sure that PSUs come out with issues without much delay and their pricing should not be aggressive. Both the regulator and the government should shorten time horizon of the entire IPO process, from the conceptualisation stage to its listing, from the existing 3-12 months.
It was widely believed that Maruti IPO would kick-start activity in the primary market. Mr Haldea, however, says: Maruti IPO has set the ball rolling. It has at least made investors take a re-look at the primary market. But, that should not make us complacent. More and more reasonably-priced PSU issues, which I would call safe issues, should hit the market before the current euphoria dies down. Big issues from private sector will only follow the PSUs. Its also essential that issues from diverse sectors hit the primary market for the revival.
Small investors risk appetite has to be raised and good quality issues at a reasonable price can help achieve it, he adds. Retail investors should set a price target while participating in the IPOs, he says.
Making a strong argument for preventing small investors participating directly in public issues, Mr Haldea says, The IPOs are highly risky. Most of the small investors do not have the resources to make a good judgement of an issue and its price. Hence, they should be made to invest in IPOs through portfolio managers and mutual funds.
If this cant be done, we should revert to the earlier book building system. I would suggest that around 40-50 per cent of an issue should be reserved for institutions and other big ticket investors to discover the price through book building and the balance shares should be offered for retail investors at a fixed price. Maruti IPO has shown that almost 90 per cent of the retail bidding was on the cut off price which itself reflects the failure of 100 per cent book building issues, he adds.
Recently, UCO Bank, Indian Overseas Bank and Vijaya Bank have filed prospectus with Sebi. Around 15 banking issues with a size anywhere between Rs 2,500-3,000 crore are in the pipeline.