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The primary market has been showing quite robust mood with a long list of IPOs (Initial Public Offerings) and FPOs (Follow-on Public Offerings). The Indian markets have managed to get back their past glory with Sensex crossing 20,000 level and Nifty crossing 6,000 level. In fact, they are just about 5% away from their all time highs set in 2007.
FIIs (Foreign Institutional Investors) have been pumping-in money into Indian capital markets as if there is no tomorrow. They have already invested more than US$ 14 billion this year; this is the highest amount for the period between January to September in any year in the history.
Liquidity, liquidity and liquidity!!!
The liquidity, which was flooding the secondary market, is all set to flood the primary market as well. To take advantage of this liquidity, Indian corporate world has lined up huge pipeline of public issuances.
Just to put the things in perspective, the week starting 20th September 2010, has featured 11 IPOs. That was the "busiest week" in the Indian primary market history after 1995. Even during the red-hot bull market of 2007, no single week featured 11
IPOs.
PSU Disinvestment activity is spicing up the primary market
The Government of India has lined up very aggressive PSU (Pubic Sector Undertaking) disinvestment activity, to sell their stakes in the public sector companies. The basic idea is to raise money through these stake sales to bring down the fiscal deficit – which is at high levels of 6% of GDP.
The Government has already completed IPOs and FPOs in some of the finest PSUs such as NTPC (National Thermal Power Corporation), REC (Rural Electrification Corporation), etc.
The biggest IPO in Indian history is just waiting to happen!!!
The Government is planning “Coal India” IPO somewhere in October and the issue size is expected to the tune of about Rs 14,000 Crores (that is about US$ 3 Billion). This will be the biggest IPO in Indian history. Currently, the IPO which is holding this record is ‘Reliance Power’ IPO, which came in January 2008, with an issue size of about Rs 10,500
Crores.
Other PSU public issuances that are waiting to happen include SAIL (Steel Authority of India Limited) FPO, Power Grid FPO, Shipping Corporation of India FPO, Manganese Ore IPO and Hindustan Copper
FPO.
2010 Primary Market has seen many IPOs by companies of new concepts
The primary market of 2010 is fascinating from an angle that there are IPOs by companies with new and innovative concepts. For instance, we get to see IPO from SKS Microfinance (Swayam Krushi Sangh Microfinance). It is the largest ‘Microfinance’ company in India started by Mr Vikram Akula with the objective of providing loans to unbanked population in rural, tier-2 and tier-3 places. The company was backed by private equity funds such as Sequoia Capital, and high-profile investors such as Narayana
Murthy.
Even though this IPO has posed some questions regarding the inherent conflict of interest between the concepts of ‘financial inclusion’ and ‘profit making’. One school of thought is that, Microfinance institutions are turning out to be ‘Organized moneylenders’. Despite all these contradictory views, the IPO has seen strong public subscription and healthy listing performance. SKS Microfinance is only the second microfinance company in the world which got listed (the first being Mexico’s Compartamos IPO in 2007).
Also, the 2010 wave of public issues has also shown the IPOs from a Gym company “Talwalkars” and Online ticket booking company “Make My Trip” (which got listed in
Nasdaq).
Conclusion
The overall mood in the Indian capital market circles is quite robust with Sensex at 20000, Nifty at 6000 and with huge pipeline of public issuances. Let’s wish that good times will continue.
—The author is Equity Head, SMC Capitals Limited
He may be contacted at jt@smcindiaonline.com
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