IPO market shows signs of recovering

MUMBAI: A fairly reliable indicator of where the market could be headed in the short term is the activity in the market for initial public offers. While the stock market looks poised to slip into another downtrend, news from the primary market is encouraging, if registrar and transfer agents (RTAs) are to be believed.

According to them, the market for public issues is beginning to stir from its near-comatose state it had sunk into about a couple of months back. Registrars say that over the past one week, they have begun signing agreements with companies that are willing to go public.

“I think we’re seeing a reversal of trend as far as the IPO market is concerned. Of late, we’ve begun getting calls from promoters who want to float their offerings in two-three months,” said Bigshare Services’ vice-president Subhash Dhingreja, adding, “we have bagged about seven mandates over the past few days and at this rate, we are confident of signing at least 40 mandates by the end of July,” Mr Dhingreja added.

Investors developed cold feet for public issues in the wake of the 3,000-point crash in January. While investors subscribed to a few smaller issues in February, big-ticket issues like Emaar MGF and Wockhardt had to be called off after poor response.

“The general expectation is that primary market will turn around by June-end or July,” Intime Spectrum Registry’s vice-president, IPO, Haresh Hinduja. “We are not worried about May or June, as these are traditionally not great months for public issues.

If the bourses stabilise by mid-June and one quality issue reaches investors, the primary market will lift up in due course,” Mr Hinduja said. Intime Spectrum has accepted about 5 mandates while Karvy has bagged about 12 mandates over the past few days.\

If all issues hit the market at and around the mid-months of the year, there could be a severe bunching of IPOs initially, primary market experts say. The big three RTAs — Karvy, Intime Spectrum and Bigshare — alone have an IPO backlog (companies who have received approvals from Sebi) of about 150 highly-probable issues.

Several promoters are also under pressure to launch their issues as the three-month waiting period (post receiving Sebi approvals) is coming to end for most of them.

“We are not seeing too many mandates (in India); but investors in other markets like Hong Kong and Japan are regaining their stomach for IPO,” said an official at a US-based investment banking firm, who did not wished to be quoted.

According to him, the biggest stumbling block is the greed of promoters.

“In current markets, promoters will have to give 20 to 30% discounts to get their issues sufficiently subscribed. But they (promoters) are not willing to do that even now,” the I-banker said.

“What we now need is a quality issue with right valuation and a strong listing to pep the IPO market up. PSUs (that have IPO plans) could provide the much needed stimulus,” he added.