Business

Mega issues to storm market

NEW DELHI JUNE 17. Never in the past have so many mega initial public offerings (IPOs) been announced in such a short period. According to Prithvi Haldea of PRIME Database, if all IPOs announced in the preceding two months, which aggregate to nearly Rs. 30,000 crores, make it to the market this year, it would not only pave way for hundreds of companies waiting for several years to raise resources, but also give the long-awaited breadth to the secondary market.

It may be recalled that the year 2001-02 was a disaster for the IPO market with only six companies raising Rs. 1,082 crores in the entire year. In fact, the mobilisation of the last five years at Rs. 7,412 crores was 25 per cent lesser than even the single year IPO mobilisation of Rs. 9,919 crores in 1994-95.

According to PRIME, a good beginning in primary market was made by Bharti Tele-Ventures in January this year. What seems to have suddenly set things into motion is the recent successes of the attractively-priced issues of PNB and I-Flex.

According to Mr. Haldea, with almost all investment opportunities drying up and the constant lowering of interest rates coupled with not so enviable performance of the mutual funds industry and the scars of several scams in the secondary market, the present IPO scenario looks attractive for the investor. For, in tough times as exist today, what is going to be witnessed is the ideal combination an investor wants, a sound company with a reasonable price. There is, of course, enough liquidity to see these issues through.

Significantly, Mr. Haldea feels that the credit for the present rush belongs almost entirely to the Government and the Securities and Exchange Board of India (SEBI). On the one hand, several banks have been encouraged to tap the market. Added to this is the Government's decision to ask some leading PSEs to come to the primary market. A point of concern, according to Mr. Haldea, though is that most of these IPOs are in the form of divestment and not for fresh capital raising which would have fuelled economic growth. The market for greenfield projects too is almost non-existent. Nevertheless, the planned IPOs will kick-start the market, and open up opportunities for fresh capital.

The forthcoming IPOs, according to PRIME, can be broadly classified into four segments — public sector enterprises, banks, MNCs and private sector corporates.

At the top are PSEs. The suggestion of PRIME, urging the government to at least partly use the IPO route for divestment, appears to have been accepted. The nine PSE IPOs, coming to the rescue of the primary market as per PRIME include four oil majors — Indian Oil Corporation (Rs. 1,600 crores), Hindustan Petroleum Corporation (Rs. 1,000 crores), Bharat Petroleum Corporation (Rs. 1,000 crores)and Gas Authority of India (Rs. 500 crores). Added to that is the Rs. 600 crore IPO of National Aluminium Company and Rs. 800 crores IPO of Maruti. Also joining the fray are three power majors — National Thermal Power Corporation (Rs. 1,500 crores), Power Finance Corporation (Rs. 1,000 crores) and Power Grid Corporation (Rs. 500 crores).

The second sector is banks. Close on the success of the PNB IPO, and the upbeat mood courtesy good financial performance in the recent fiscal, at least 15 PSE banks are now queuing up according to PRIME. This includes Allahabad Bank (Rs. 100 crores), Bank of India (Rs. 200 crores), Bank of Maharashtra (Rs. 150 crores), Canara Bank (Rs. 400 crores), Central Bank of India (Rs. 500 crores), Indian Overseas Bank (Rs. 100 crores) Punjab & Sind Bank (Rs. 100 croes), State Bank of Mysore (Rs. 200 crores) UCO Bank (Rs. 200 crores), Union Bank of India (Rs. 400 crores), United Bank of India (Rs. 100 crores) and Vijaya Bank (Rs. 200 crores). Private sector banks include Lord Krishna Bank (Rs. 100 crores) and IDBI Bank (Rs. 400 crores). SIDBI is also planning a Rs. 500 crore issue.

The third, and an interesting category, is that of the MNCs. Topping this list, according to Mr. Haldea, is Coca-Cola which has finally been asked by the government to honour its agreement to float an IPO. Among others, who are in the fray are Hyundai Motor and LG Electronics. The IPOs of all these three companies are expected to be in the vicinity of Rs. 1,000 crore each.

The fourth category is the private sector. According to PRIME, at least 15 mega issues are in the offing including TCS (Rs. 5,000 crores), B4U Television (Rs. 100 crores), Idea Cellular (Rs. 1,000 crores), Star TV (Rs. 500 crores), Tata Teleservices (Rs. 1,000 crores) and AB Corporation (Rs. 200 crores). Other significant private sector companies include Biocon India, Crocodile Products, HFCL Infotel, Maya Entertainment, Mohan Clothing, NDTV, Newgen Software and Servion Global Solutions. The biggest surprise, however, could be in the form of the largest-ever issue-that from Reliance Infocom, which some market men expect to be in the region of Rs. 10,000 crores.

On the other side of the spectrum, according to PRIME, are such companies that have been in the pipeline for long. This includes 72 companies whose SEBI approvals expired as they could not tap the market within the stipulated one year period. Several of these would also now relook at their plans. These include Eskay K'nit (Rs. 300 crores), Godrej Sara Lee (Rs. 200 crores), Nimbus Communications (Rs. 182 crores) Mahindra British Telecom (Rs. 150 crores), Paras Pharmaceuticals (Rs. 150 crores ), UTV Software (Rs. 100 crores), Datamatics (Rs. 100 crores) and Krishna Knitware (Rs. 100 crores).

A word of caution though, from Mr. Haldea. Even the very first of the forthcoming issues listed above is at least two-three months away as the filing with SEBI is yet to begin. As of now, there are only three companies holding SEBI approval, these being Dwarikesh Sugar (Rs. 12 crores), Future Communications (Rs. 18 crores) and Vins Bioproducts (Rs. 20 crores). In addition, there are only two small issues which are now filed with SEBI, awaiting approval. Fingers need to be crossed with the hope that the geo-political developments do not escalate and the secondary market does not go southbound as these factors would act as big dampers for the revival of the comatose primary market.

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