Deccan IPO

Deccan Aviation has decided not to rope in any private equity investors forthe present and plans to hit the market to raise approximately Rs 500-550crore, sometime in the second week of May.    The initial public offering (IPO) for 2.45 crore shares is likely to bepriced in a band of Rs 200-250. Two of the merchant bankers associated withthe IPO, ABN Amro Rothschild and JP Morgan, may however, withdraw from it.The issue will now be lead managed by ICICI Securities, Enam and SBI Caps.The reason for this, according to a senior company executive is that JPMorgan and ABN Amro have other commitments in May. However, should the IPObe delayed for any reason and hit the market only in June or July, theseinvestment bankers may once again be part of the team.    While Deccan has been toying with the idea of a preferential allotment toprivate equity investors, even before the IPO, it was apparently taking toomuch time. The company needs to bring out the public issue before May 20;otherwise it will have to file a fresh prospectus with Sebi. In fact Deccanwas to bring the IPO in February, which got delayed because of a deal thatthe company was negotiating with Airbus. While ABN Amro and JP Morgan werecomfortable with the public issue coming up in February-March, they nowhave other assignments.    However, sources say, the investment bankers were also not too comfortablewith the pricing as indicated during the road shows overseas; they found itaggressive. At that time, the price being talked about was between Rs300-325 per share. The overseas investors have been a little wary of theaviation stocks because Jet Airways, which came out with its IPO inFebruary last year, is currently trading below Rs 1,100. However, theshortage of aviation stocks and the lower pricing should generate interestfrom both foreign and local investors, say merchant bankers.    Deccan Aviation incurred a net loss of Rs 19.5 crore for the year-endedMarch 2005, on a net income of Rs 305.5 crore. The loss for the six monthsended September 2005, was Rs 72.5 crore, on a net income of Rs 328.86crore.    The issue will result in a dilution of 25 per cent of the post-issue equityof Rs 98.18 crore and the price band of Rs 250-250 would mean a marketcapitalisation of Rs 2,000-2,500 crore. Jet, which trades at Rs 970 has amarket capitalisation of Rs 8,378 crore.