Rs 55,000 cr to be tapped via IPOs

As the secondary market is in the midst of yet another roller coaster ride, usual doubts have begun resurfacing about the fate of the companies planning public issues in the near future. Companies with total issues of over Rs 55,000 crore are already at an advanced stage of tapping the markets.

Prithvi Haldea, MD, Prime Database, said the actual amount raised could far exceed that if the market remains stable.

“The companies have to take a call on the market two months before as this is the time required for the whole process. If the markets do not show signs of stability, the companies do not get ahead with it,” he said.

“Therefore, if there are signs of stability in the coming year, the issues could go much higher. This is evident as there are plenty of issuers apart from the above and the enough domestic and foreign investors to subscribe to these issues,” Mr Haldea added.

According to Prime Database, the company which tracks primary markets, public issues by companies amounting to over Rs 11,500 crore have already been filed with Securities and Exchange Board of India and some of them have already received approval. The major initial public offerings (IPOs) among them being Idea Cellular, Fortis Healthcare, Power Finance Corporation, Indian Bank among others having an issue size of approximately Rs 2,500 crore, Rs 1,000 crore, RS 1,500 crore and Rs 900 crore respectively.

Also in the offing are IPOs of companies which are yet to file prospectus for approval like the much awaited DLF Universal and others like National Hydroelectric Power Corporation, Omaxe Construction, Bombay Stock Exchange, Multi Commodity Exchange, Power Grid Corporation, Spice Communications, SET India, Peninsula Land and United Spirits amounting to about Rs 21,000 crore.

Also in the pipeline are large Follow-on Public Issues (FPOs) largely from public sector banks like State Bank of India (SBI), Canara Bank, Vijaya Bank and Uco Bank amounting to a total of about Rs 16,500 crore with SBIs issue alone amounting to Rs 12,000 crores apart from the Central Bank of India’s IPO of about Rs 750 crore.

Rajnish Rangari, president and head, investment banking, Bajaj Capital said it may not be possible for companies to raise that much amount in a single year. “In the last three years the companies have raised about Rs 75,000 crore from the market. In the financial year 2006, the companies have raised about Rs 25,500 crore, this calendar year’s figures could go up to about Rs 22,000 crore, if we include the Cairn IPO also.

However, issues amounting to Rs 55,000 to 60,000 crore seems to be an uphill task for 2007 calender year alone. Another thing to take into consideration would be how much of this amount that the company’s are planning would be through pre-IPO placement as that could also reduce the total amount raised from the market significantly.”

Other investment bankers say that even if the markets do not continue to perform like the past, there is no stopping to these IPOs. The only difference would be that the companies would not be able to price the issue the way they would have done in the past. But, there are companies that would go ahead with their fund raising plans even if the bull-run does not continue.

The other major companies that are at an advanced stage include Orbit Corporation, Ind Synergy, Akruti Nirman, Pearl Fashions, Gammon Infrastructure, Mudra Lifestyle et al. Besides these there are other companies like North Eastern Electric Power, Haldia Petrochemicals, Mindtree Consulting and Alliance Nirmaan.