Back on track: IPO mkt recovers

NEW DELHI: The recent decision of the Securities and Exchange Board of India (SEBI) to cut the timeline for rights issues and change the pricing rules will enable India to improve its ratings in the global IPO market, industry players feel. SEBI recently reduced the duration for a rights issue from 109 days to 43 days.

India was in the fifth position in the global IPO market, raising around $4.3-billion from 32 deals so far this year. The only other Asian country in the top five is China, which came second, raising $15.6 billion from 94 IPOs, according the media.

The ranking indicates that India's IPO market has managed to recover after some companies such as Wockhardt Hospitals and Emaar MGF pulled out their public offerings due to inadequate response. Global IPO volumes have dipped by 51.3% so far this year, reaching around $87-billion from 403 issues.

The United States tops the global IPO list, with Saudi Arabia and Brazil at the third and fourth spot, respectively. This year, the Dalal Street is expected to see 55 more IPOs, which may raise around $18 billion. Around 118 follow-on public offers (FPO) are also expected, raising proceeds around $17-billion. Analysts believe investment bankers' ability to raise money even in the volatile market will boost companies tapping the market.

"From a regulatory standpoint, the two decisions that Sebi has made with respect to minimum price for QIP and shortening the rights issue timeline are progressive. These will help issuance in current volatile markets and may further heighten the activity in the equity capital market. The industry is now looking forward to pricing relaxation for ADR, GDR and FCCBs. Increasing the validity period for SEBIcomments from existing three months will also help the IPOs of unlisted companies," said Sanjay Sharma, MD, Deutsche Equities India.

The biggest IPO that may hit the Indian market this year could be GIFTCL raising around $ 2 billion, followed by ICICI Venture with $1.5 billion. While there may be follow-on offers (FPO) from companies such as Essar Oil, Ranbaxy, Suzlon Energy, Hindalco Industries and Tata Motors, raising nearly $7 billion. "Due to volatility, companies are not sure when their issue hits the market. The new guidelines will provide them some sense of security and it cannot be ruled out that we may see more companies coming out with initial or follow-on offers," said Sunil Sinha, senior economist at Crisil.