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Follow on Google News | Indian IPO market touched 5-year low in '09Globally, IPO activity picked up in the second half of 2009, driven largely by Asia and South America. India contributed 3.5 per cent of global IPOs (in terms of numbers) in 11 months ending30 Nov 2009, compared to 4.9 per cent in 2008
By: ARC Ffinancial Services pvt Ltd Despite a surge in the secondary market in response to negative investor sentiments, the IPO market witnessed just 17 issues in 2009 compared to 37 and 103 public issues listed in 2008 and 2007 respectively, according to a report from financial and investor advisory ARC Financial Services. This was a decline of 55 per cent over 2008 and 83 per cent on 2007 levels. In terms of capital proceeds, 2009 raised Rs 15,700 crore from the market — the lowest in the last four years — as compared to Rs 18,500 crore in 2008 and Rs 34,200 crore in 2007. Of the 17 IPO, as many as 15 came in the second half of 2009, garnering Rs 15,650 crore out of the total 2009 proceeds of Rs 15,700 crore, ARC Financial Services director Tapan Jindal said. Thirty per cent of the top 10 IPOs of 2009 were actually from 2008 or 2007, which could not hit the market earlier because of poor investor sentiment, Jindal noted. NHPC, AdaniPower and Cox & Kings waited for more than a year to get listed in 2009, though they received SEBI approval in 2007 or 2008. Energy and power emerged as the hottest sectors of 2009, according to the report. All three IPOs in this sector — OIL India, Indiabulls Power and Adani Power — were oversubscribed more than 21 times. However, the total number of IPOs oversubscribed by more than 10 times in 2008 and 2009 was a mere 25 per cent compared to -50 per cent in 2007. Even as the markets remained largely lacklustre throughout 2009, SEBI introduced the concept of ‘anchor investors’. This was to help the price discovery process, as well as lower listing day volatility by bringing in investors with a slightly longer term view on a particular stock. Anchor investor, who cannot be promoters of a company) can now subscribe up to half of the 60 per cent reserved for qualified institutional buyers (QIBs) in an IPO, but have to stay invested in the issue for a month after listing. Also, unlike other QIBs who need to pay only 10 per cent as margin money, an anchor investor has to cough up 25 per cent and follow it up with the remaining 75 per cent within two days of closure of the issue. With more than 60 firms currently under process by SEBI to raise approximately Rs 40000 crore this year, analysts expect the number of draft offer documents filed with SEBI to match 2007 levels. The central government’s PSU divestment programme is also expected to gain momentum in 2010, with the government expecting to raise Rs 50,000 crore by the end of 2010. Combined with the increase in liquidity in the markets and stabilisation in the secondary markets, these factors are expected to help companies raise money more easily in 2010. Globally, the total number of IPO listings fell significantly from January to November last year, with only 459 IPO listings, compared to 745 deals in 2008. However, the capital raised through IPOs in 2009 aggregated at $95 billion, nearly the same as 2008’s $94 billion, led by increase in average IPO size. Chinese companies emerged as the largest contributor of total funds in the global IPO market in 2009. India contributed 3.5 per cent of global IPOs in the 11 months ending November 30, 2009, compared to 4.9 per cent in 2008. # # # ARC Financial Services Private Limited (ARC) provides ‘Financial Research & Analytics’, ‘Business & Corporate Intelligence’ End
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