NEW INITIAL PUBLIC OFFER (IPO's)
Scenario In 2008 & 2009
Over the past 10-12 months, there have been virtually no IPOs. It’s a tap which has gone dry. In the calendar year 2007, Indian companies raised Rs1,45,000 crore from the markets and expected to raise Rs.2,50,000 crore from the Indian markets in 2008 but managed to raise just Rs.50,000 crore. Things only got worse in 2009. According to Prime Database, only one IPO hit the market in 2009 (till April), raising only Rs 24 crore. Interestingly, there was only one PSU IPO in 2008 and that was Rural Electrification Corporation which raised Rs 1,421 crore.
Expected IPO's Ahead
Those expected to hit the markets when the divestment plans take off would be the much awaited
1.Oil
2.NHPC (Rs.2,060 crore) IPO , and
3.Rail India Technical and Economic Services (RITES).
All these three already have the necessary approvals. The news on the street is that once this revival process takes off, around 18 companies are ready and waiting in the wings with their IPOs, and they, together expect to raise around Rs.7,405 crore. Then there are the others like
1.Cochin Ship Yard,
2.Telecommunications Consultants India,
3.
4.Rashtriya Ispat Nigam and
5.Satluj Jal Vidyut Nigam.
There is also the IPO from UTI Asset Management Company. The Govt is also expected to fast track issues of BSNL, National Aviation Company and Ircon International.
PSU IPO’s are normally at reasonable prices and in the current market, such issues, which are not overvalued will do well. And even if one PSU IPO manages to evoke a huge response, it will restore the faith back into the primary market, paving way for the others. And the response is expected to be very good as investors are starved for new issues and anything which is good right now, will appeal hugely.
There are two companies which have filed their Draft offer documents with SEBI –
1. Kabirdass Motor Company which filed on 28th April 09’ and
2. Adani Power which filed on 22nd April 09’.
The buzz going around is that PSU divestment would be a priority on the agenda of UPA when it takes charge, which in turn would revive the IPO markets. The logic behind the divestment process taking off in a big way is the burgeoning fiscal deficit, which has ballooned out of proportion. So getting that demon under control will be the priority and to do that, divestment would be the best and the easiest way to raise money. It could go in for minority stake divestment or majority divestment but it is sure to go full throttle.
Some of the PSUs where the Govt has a stake above 85% and are some of the companies where the Govt could reduce its stake.
1.Hindustan Copper,
2.NMDC,
3.MMTC,
4.Neyvelli Lignite,
5.Power Finance Corporation,
6.Indian Oil Corporation