34 IPOs to hit market in H1 to raise $14,171 mn

NEW DELHI: It will be raining initial public offers (IPOs) in India during the first half of 2008. As many as 34 issues will hit the capital market raising an estimated $14,171.7 million, an increase of nearly 300% over the corresponding period last year.

This would make India the fastest growing IPO market in the first half of 2008 in the Asia-Pacific region. Its nearest rival, China even with 55 IPOs lined up would be lagging behind, registering increase of only 30% in the proceeds raised during the corresponding period last year ($18,786.4 million).

This data is based on a research undertaken by Thomson Financial, an arm of The Thomson Corporation, one of the world's leading information companies. As per the report, year 2008 will also see some mega IPOs getting listed on the Indian exchange such as Reliance Power, and Emaar-MGF. Overall, it is estimated that there will be 143 initial offers in the first six months in the Asia-Pacific region.

According to the report, India will capture around 26% market share to stand on the second pedestal after China ($25,609.3 million; 47% market share) in the $54,932.5 million Asia-Pacific region market in the first half of 2008.

Sanjay Aggarwal, national industry director, KPMG believes that so many public offers hitting the Indian market clearly indicates that India Inc. requires growth capital and the investors also share the faith in their plans. "Earlier companies used to raise capital overseas where there are more regulatory issues and the cost of compliance high. But now they can raise a considerable sum in the Indian market," he says.

In terms of sheer numbers, Reliance Power ($2,500 million) and Emaar MGF ($1500 million) will be the second and fifth biggest IPOs in the Asia-Pacific region, according to estimates of Thomson Financial. Reliance Power, set to come out on January 16, will be India's largest IPO on record shattering DLF's IPO record worth US$2300 million launched in April 2007.

Four of India's top 10 IPOs on record were issued in 2007. China Metallurgical Construction Group will be the biggest IPO to hit the Asia-Pacific region during the period, worth $3,000mn. In fact, amongst the 10 biggest IPOs to line up in the Asia-Pacific region during this period, China has six, while India has two, and Singapore and South Korea one each. Other prominent IPOs expected to hit the capital market in India include those of Air India, DLF Asssets , Coal India, and GSPC .

By the first half of 2008, Thomson Financial estimates Indian power companies to be the second most active after financials (US$6.2 billion from 10 issues) in the IPO market. Indian IPOs have reached a record year in 2007 where US$8.3 billion from 90 issues were launched, almost an increase of 75%.
The IPO burst is expected to propel India ahead of economies such as those of South Korea, Australia and Hong Kong. Currently, India ranks ninth in the IPO market all across the globe, capturing 2.7% market share — up from just 1.8% global market share in the same period last year, even a bigger IPO market than Australia, Japan and Italy.

Aggarwal feels that more issues is good for retail investors, as they've more options to choose rather than picking from the same basket. "There is nothing to be surprised that so many IPOs will hit the primary market. Most of them are from companies which are making a foray in the infrastructure segment, which requires large capital. This is just the tip of the iceberg," he says.

However, Dipen Shah, vice-president (private client group) of Kotak Securities, takes a more skeptical view. He believes that the string of IPOs may hit the secondary market. "People will be taking out money for investing in new issues and the liquidity will be sapped out. This can derail the markets," he says. Shah feels that more IPOs also mean that company with good valuations can benefit the most, often being oversubscribed.