Narendra Modi’s landslide election win is set to trigger billions of dollars in share sales by Indian companies riding market optimism, but big-ticket IPOs may have to wait until the new leader proves he can deliver on promised reforms.
Indian stocks hit a record high on Friday as investors cheered results showing Hindu nationalist Modi’s pro-business Bharatiya Janata Party won a clear majority and the mandate to pursue reforms without having to haggle with minor parties.
Several brokerages lifted their outlooks for India’s benchmark index and companies were queuing to ride the wave of political euphoria that began to build weeks earlier as opinion polls predicted a resounding Narendra Modi victory.
“That will spark renewed interest in deals and capital-raising,” Viral Gathani, of CIMB Investment Banking in Hong Kong said, when asked about the impact of Modi’s emphatic victory on India’s moribund market for new share issues.
He said many companies that had put share issues on hold would now consider dusting off their plans.
On Monday, private sector lender HDFC Bank said it would seek shareholder approval to raise up to 100 billion rupees ($1.69 billion) in fresh equity.
Smaller rival Yes Bank Ltd, whose stock price has almost doubled since the end of February, is likely to raise about $400 million in new shares within a month to bolster its balance sheet, sources with direct knowledge of the matter said.
Bankers for two separate Indian infrastructure business trusts worth a combined $1 billion to be listed in Singapore decided, after exit polls last week, to kick off preliminary marketing as early as this week, sources said.
L&T Infrastructure Development Projects Ltd (IDPL), a unit of engineering conglomerate Larsen and Toubro, plans to raise about $600 million through a Singapore trust listing, while Infrastructure Leasing & Financial Services Ltd (IL&FS) is also planning an offering of around $400 million in Indian wind power assets, bankers said.
The bankers declined to be named as they were not authorised to speak to the media about deals and political issues.
A sluggish economy and stalled bureaucratic decision-making for the past two years have battered Indian corporate sentiment and thwarted capital investment. The last large IPO was Bharti Infratel’s $750 million listing in late 2012.
For IPOs of $500 million or more to come to market in India, issuers and investors will need to see a quarter or more of stock market buoyancy as well as progress on economic reforms, bankers and fund managers told Reuters.
“IPO revival will take time as the market move and sentiment change has happened very fast. However, secondary sales, QIPs (qualified institutional placements) should start in a big way,” said Sandip Sabharwal, chief investment officer at Sun Capital.
IPO issuance in India has almost ground to halt, with last year’s total of $342.7 million the lowest since 2001, Thomson Reuters data showed. In 2010, the last significant year for IPOs in …continued »