IPOs on a record run

The number of companies wanting to cash in on the stock market boom is at afive-year high. A total of 128 companies had filed offer documents forequity issues with the Securities and Exchange Board of India (Sebi) tillDecember 2.

Of this, 63 companies have already mobilised Rs 18,904 crore from thecapital market this year. Five issues are in the market to collect Rs 4,500crore, taking the total amount to Rs 23,404 crore. In the pipeline are 63issues that plan to mobilise Rs 8,500 crore.

During the information, communication and entertainment boom of 2000, 126 issues had hit the market, but most of them were small in size and could mobilise only Rs 3,254 crore. The markets had seen over 1,000 issues inthree consecutive years -- 1994, 1995 and 1996. Collectively, 3,492companies mobilised Rs 16,939 crore through public offerings in those threeyears.

Of the offer documents filed by 128 companies with Sebi this year, only 13public offers (eight of them from banks) are by existing listed firms and 115 are initial public offerings (IPOs). In November alone, the promotersof 16 companies filed drafts of offer documents. According to data sourcedfrom the Sebi website, the number of companies that filed draft offerdocuments for public offers in November has been the highest in the lasttwo years.

Entertainment Network, Celebrity Fashions, Inox Leisure, Royal OrchidHotels, Shirt Company, Space Computer and Systems, Shivalik Global and Rohit Ferro-Tech had filed drafts of offer documents with Sebi last month.The sectoral classification shows five companies are from the informationtechnology sector, four each from entertainment, steel alloys, textiles andretail business, and three each from the engineering and power sectors. Thelist also includes three listed banks_ICICI Bank, Andhra Bank and Bank ofBaroda. However, Andhra Bank and Bank of Baroda have not yet decided theprice band for raising money through book-building.

Aditya Birla Nuvo

Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,031
Current market price: Rs714

Master of all trades

Key points

• Aditya Birla Nuvo (ABN) is a unique play on four of India's most exciting sectors: garments, insurance, telecom and information technology (IT)/IT enabled services (ITES). The Stock Idea is also a play on the strong Indian growth story, especially the strong consumer demand, the evolving outsourcing trends and the strengthening financial system.
• ABN has adopted the perfect recipe for growth: mint money from the cash-rich businesses of rayon, carbon black and fertiliser, and focus on the high-growth business of garments, telecom, insurance and IT/ITES. Consequently, the company expects the share of revenues from its high-growth businesses to rise from 53% in FY2005 to 75% in FY2008E.
• Owing to the diversified nature of its businesses, the company is valued using the sum-of-parts method. Using this method we have arrived at a fair value of Rs1,031 per share. The stock is available at a 44% discount to this fair value and we initiate a Buy on it with a 12-month price target of Rs1,031.