Mumbai, Nov. 5: A string of initial public offers (IPOs) will court investors soon as promoters and merchant bankers time flotations to coincide with the stratospheric heights the stock markets have hit in recent days.
There is large section of the market which feels it was Maruti that rekindled investor interest in equity. “A flurry of new issues from biotech, software, banking and oil and gas companies is on the cards, besides firms in which the government could sell its stake,” says S. Ramesh of Kotak Investment Banking, whose firm piloted the record-busting Maruti maiden offer.
However, this time round, investors are likely to sift through IPOs more closely than they have done in the past. Ramesh says most of the planned issues are from companies with a track-record of management and profit. “These are firms that should give investors confidence.”
Ramesh is one of those who see a strong link between the primary and secondary markets. “Empirically, there is a correlation between the secondary and primary markets. Typically, a lag of six months.”
The way investors swarmed Maruti and UCO Bank with share applications — a million wanted to get a chip of the car maker — shows a retail resurgence for IPOs.
For investment bankers like Ramesh, what matters is that all new issues sold have made money for investors. “Every maiden offer from January 2002 has returned money to investors. About a dozen issues have come to the market during this time and those who bought them have collectively pocketed around Rs 5000 crore on investments of close to Rs 3500 crore,” he added.
The IPOs planned over the next few months could raise at least Rs 7000 crore. It could be more, say analysts, if government-owned behemoths like NTPC hit the primary market.
Analysts reckon the primary markets will be different from the late 90s when the tech boom spawned a rag-tag bunch of fly-by-night firms, which disappeared, taking thousands of small investors a ride. “We do not see a large number of companies trooping in. The primary market will see fewer number of issues but with a proven track record,” Ramesh said.
Among the IPOs that will get off the block soon are those of Indraprastha Gas, which will raise Rs 150 crore. TV Today is planning a Rs 100-crore flotation.
Patni Computers and Biocon will go public with a Rs 300-crore offering each. Bank of Maharashtra is mulling a Rs 200-crore public offer
But the biggest and most coveted could be TCS’ issue, which should aim at garnering not less than Rs 4000 crore.