Mumbai, Feb. 6: A blockbuster bandwagon is about to hit town, offering small investors a chance to own a slice of Business India’s money machines.
With the stock markets booming again, companies are preparing to dive into the pockets of retail investors to scoop up a phenomenal Rs 55,000 crore through a spate of new equity issues.
The government has lined up big-ticket selloffs in state-owned oil companies ONGC and Gail India, power utility NTPC and a couple of other well-managed companies to take advantage of the feel-good sentiment to raise over Rs 15,000 crore.
Several private companies are also jockeying to hit the market in the next two months — a situation that pundits say will spawn a ‘new equity cult’ in the country which saw retail investors scuttle out after a major stock scam broke three years ago.
Despite the inherent risks, the public issues will offer retail investors an avenue with prospects for better returns. Most savings options have turned less attractive in the wake of the steep cut in interest rates over the last few years.
The optimists reckon that the initial public offerings will suck out Rs 55,000 crore during this calendar year, though the more conservative estimate is Rs 25,000 crore.
If ONGC’s Rs 9,000-crore issue goes through without a hitch, it will easily overtake the Rs 5,500-crore Reliance Petroleum issue of 1992 and become India’s largest-ever offer.
“If the ONGC issue is attractively priced, ordinary investors who have never invested in equity shares could invest,” said Ved Prakash Chaturvedi, the CEO of Tata Mutual Fund. “Savings could shift as the returns in other instruments diminish,” pointed out Chaturvedi, adding that public issues usually bring new investors into the equity market.
Concurring with Chaturvedi, S. Ramesh of Kotak Investment Banking said a trend was discernible after the Maruti issue drew hordes of first-time investors and raised Rs 990 crore.
The stock markets have been choppy ever since the benchmark sensex touched an all-time high of 6,249 on January 9. Some attribute the turmoil to regular investors waiting to put money in the new stocks.
But Chaturvedi does not support the notion that public issues would suck money out from the stock markets. “Remember, Indian investors have a mere 1 per cent equity exposure,” he said. But nearly Rs 100,000 crore is generated in new savings.