The near comatose IPO market is surely showing of life and that too good life. All of a sudden, there seems to be a bevy of activity around the IPO markets and investors are reminded that apart from the secondary market, there is also the option of primary market coming forth soon.
The issue of Mahindra Holiday, despite being expensive managed to do well and the fact that it listed well above the IPO price, 5% premium over the issue price, has managed to buoy the moods – not just of the investors but of the companies too. The success of Mahindra IPO sent out a strong message – there is an appetite for IPOs but investors clearly are now careful about where they are investing. Known and reputed companies are what will see a good response.
The first such big issue is from Adani Power. This issue is opening on the 28th of July and closing on 31st July. This is the biggest power IPO to come to the market in a long while. The news on the street is that in all probability the IPO would be priced at around Rs.100-110 and aims to raise over Rs.3000 crore. Adani Enterprise, the listed group company, has been up since this news was announced as it holds a substantial stake in the company.
Then on 7thAugust, there is the IPO of PSU National Hydroelectric Power Co. (NHPC). The issue closes on August 12 and aims to raise over Rs 2,500 crore. As per the DRHP, the company is coming out with a public issue of 167,73,74,015 shares of Rs 10 each, which comprises a fresh issue of 1,11,82,49,343 equity shares by NHPC and an offer for sale of 55,91,24,672 equity shares by the president of India acting through the ministry of power, government of India. The issue shall constitute 13.64% of the post-issue capital of NHPC.
A month later, on 7th September, we have the IPO of Oil India Ltd (OIL), which aims to raise around Rs.2000 crore. The DRHP states that the issue is up to 26,449,982 equity shares of Rs 10 each and will be 11% of the fully diluted post-issue capital of the company.
So by September the IPO market aims to have raised Rs.6000 – Rs.7000 crore and surely, once this gate of raising money opens up, we will soon a flurry of activity. Infact Indiabulls Power has filed its DRHP with SEBI and it expects to raise around Rs.1500 crore.
As per Prime Database, 16 more companies have regulatory approvals and are finalizing plans to raise over Rs.5,700 crore from the IPO markets in this year. So what we are saying here is that 2009 would probably see around Rs.8000-Rs.10,000 crore being raised from the IPO markets. And those who have seen the IPO of Reliance Power, cannot help but ask, “will the market be able to absorb so much?”
The fact that over Rs.12,000 crore was raised via QIPs and there are more in the pipeline means that even the FIIs are waiting in the sidelines. Another point in favour of the primary markets this time around is that we are not in the stratosphere, with a zooming index. The Sensex is more subdued right now and this makes the pricing more attractive.