India is poised for a record year of share issues as companies and the government take advantage of the country’s booming stock market.
Prime Database, an Indian primary market monitoring agency, said it was likely that around $10bn would be raised in 2006, exceeding the previous record of $7bn in 2004. The issues include initial public offerings, secondary offerings and the divestment of government shareholdings.
Issues already filed this year with the market regulator, the Securities and Exchange Board of India, total $1bn.
The optimism follows a 57 per cent surge in the benchmark BSE Sensex stock index over the past year. Mumbai was the third-best performing stock market in Asia in 2005.
In terms of size, the sector dominating the IPO pipeline is telecoms. According to the Prime Database list, Reliance Infocomm is planning a $3bn offering and there
are issues worth $450m each in the pipeline from Hutchison Max Telecom and Idea Cellular.
State-owned companies and banks with government participation are expected to account for one third of the total issues. Prime Database expects these to include Air India, Indian Airlines, Power Finance Corporation and Power Grid Corporation.
Some public sector banks – Central Bank of India, Indian Bank, Punjab & Sind Bank, UCO Bank, United Bank of India and Vijaya Bank – are also in the queue.
However, the government issues would not only require approval from respective ministries but also from coalition partners of the Congress-led national government. The coalition includes the Left Front party, which has opposed divestment of profit-making public sector units.
Meanwhile, there are other IPOs that do not feature in the Prime Database list.
For instance, Reliance Industries, India’s largest private sector conglomerate, recently said it planned to raise up to $1.3bn through the IPO of its subsidiary Reliance Petroleum.
Prithvi Haldea, founder and managing director of Prime Database, said there would be no problem with demand. There were 81 IPOs between June 2003 and November 2005, and 79 of them are now trading above their offer price levels.
The successful listing in 2002 of Bharti Tele-Ventures, India’s biggest GSM mobile service provider, demonstrates why new issues are so appealing to Indian investors. Bharti’s shares, issued at Rs45, are now trading at about Rs359.
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