Bumper year for primary mkt

It was a dream year for India Inc to raise funds from the capital market.

It was a dream year for India Inc to raise funds from the capital market. An extremely bullish secondary market for most part of the year, combined with a high-return primary market saw 2007 with a record, highest-ever mobilisation of Rs 45,137 crore through public equity issues, comprising both initial public offerings IPOs and follow-on public offerings FPOs. An increase of 83 per cent on the previous year which had seen raisings of Rs 24,679 crore.

IPOs clearly dominated with 101 issues collectively mobilising Rs 34,209 crore, up by 72 per cent from Rs 19,862 crore in 2006. FPOs made by 6 listed companies helped raise Rs 10,928 crore, up from as many as 19 such issues last year, which though had raised a small amount of Rs 4,817 crore, according to Prithvi Haldea,CMD of Prime Database.

The new year promises to be equally exciting. 8220;Indian firms have 6.8 billion worth of IPOs in the pipeline from 30 upcoming IPO deals. Most anticipated of which is Emaar-MGF Land Pvt Ltd8217;s IPO worth around 1.5 billion,8221; said a study by Thomson Financial Deals Express. Currently, China is leading the global IPO race with 91.3 bn from 213 issues. A comfortable lead against the US with 38.9 bn from 178 deals, Thomson said.

The mobilisation in 2007 would have been much larger but for the near-lack of PSU divestments. 8220;In 2004, an impressive Rs 16,819 crore was accounted for by PSU divestments, which went down to nil both in 2005 and 2006. Courtesy Power Grid, 2007 saw a meagre divestment of Rs 995 crore,8221; Prime Database said.

By number of issues also, the performance for the year was in the positive. Compared to 92 public equity issues in the previous year, 2007 recorded 107 public issues, registering a 16 per cent increase. 8220;Bookbuilding issues continued to dominate. Of the 107 issues, though only 93 issues 87 per cent were made through this route, these collectively mobilized over 99 per cent of the year8217;s amount,8221; Haldea said.

On another front, according to Haldea, there was a continued dominance of fresh capital, which typically goes into productive assets as against offers for sale where the proceeds goes to the seller 8212; promoters, funds and other investors 8212; and not to the company. Fresh capital increased to an impressive Rs 43,060 crore, 81 per cent higher than Rs.23,737 crore in the previous year. Offers for sale raised only Rs 2,077 crore in 2007, compared to Rs 942 crore in 2006. It may be recalled that 2004 had been dominated by offers for sale mainly courtesy PSUs which had aggregated a huge Rs 19,808 crore, though these had declined in 2005 to only Rs. 2,374 crore.

A highlight of the year was the entry of the real estate sector in the listing domain in a big way. Real estate companies, through 12 issues, dominated with 33 per cent share at Rs 15,185 crore, led by DLF. Among other sectors, banking had 28 per cent share at Rs 12,639 crore through 4 companies while power and telecom had 7 per cent share each.

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India is now in the big league. In this calendar year too, according to Prime, there were 6 issues of over Rs 1,000 crore each compared to 5 in the preceding year. The year also witnessed the largest-ever IPO in India 8212; from DLF for Rs 9187.50 crore. The year continued to witness a near-demise of small issues; there was only one issue of below Rs 10 crore, quite like 2006 which had no such issue or 2005 which had just 2 such issues. The average size of public issue increased significantly to Rs 421 crore in 2007 from Rs 268 crore in 2006.

Most significantly, the year, according to Haldea, was again characterized by good quality issuers; one or combination of well-established companies or promoters. Strict entry norms of SEBI and stock exchanges, detailed disclosure norms, combined with compulsory participation of QIBs, have also played a very important role in improving the quality of issues. Little wonder, almost all IPOs gave impressive returns; of the 93 out of 101 IPOs listed till date, as many as 85 offered an exit at a premium on the listing date, with the gains exceeding 50 per cent in 38 issues and exceeding 10 per cent in 74 issues. In 16 cases, the gains were in excess of 100 per cent.

Courtesy the high quality and bullish sentiments, response from the public to the issues of the year was excellent with huge oversubscriptions in almost all issues. In fact, as many as 50 of the 101 IPOs received oversubscription of more than 10 times, the highest being Religare Enterprises at 159 times. Several issues attracted a large number of applications, with Power Grid leading at 12.26 lakhs, followed by Mundra Port at 11.05 lakh. The year also witnessed a complete demise of regional stock exchanges. All 101 IPOs are listed on the BSE or NSE.

TOP FIVE ISSUES

ISSUER AMOUNT

ICICI BANK 10,044.00

DLF 9,187.50

POWER GRID 2,984.45

IDEA CELLULAR 2,443.75

MUNDRA PORT 1,771.00

In Rs crore