NTPC IPO seen spurring new issues in Indian market

Friday, 15 October 2004, 19:30 IST
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MUMBAI: Buoyed by the impressive response to the share sale offer of state-run National Thermal Power Corp (NTPC), a slew of India's public and private sector firms may rush to tap investor appetite in the days ahead. Analysts say many prospective issuers are waiting in the wings to float initial public offering (IPO), marking the launch of record numbers of issues in the domestic primary market in one year. The initial public offering of NTPC, one of the leading players in the country's power sector, was subscribed over 10 times the size of the issue as the bidding process ended Thursday. The public sector firm had launched a one-week public offering period by floating 865 million shares at a price range of between 52 and 62 a share. "The response to the NTPC IPO has been very impressive. The massive investor response to the offering comes as a major boost to the capital market," said Manish Chokhani, director of Enam Securities, a portfolio management company. "The response is definitely going to tempt many companies to revive the plans of going public to raise funds. The issue has clearly shown that the market has enough appetite for quality issues," Chokhani told IANS. "The main reason for the euphoric investors' response is the fact that these kind of new quality public offerings give new investors, both retail and institutions, to enter the market." NTPC shares would be listed on the bourses on Nov 5 and the company management would meet in the next two to three days to decide the cut-off price for its mega public offering that could mop up over 50 billion ($1 billion). Banking sources familiar with the issue say the shares are likely to be listed at the upper end of the price band at which it received maximum number of bids. The share sale of NTPC received huge participation from institutional investors that is expected to be around 18 times more than the number of stocks earmarked for them. High net worth individuals portion of the IPO was oversubscribed by about 15 times while the portion reserved for retail investors was oversubscribed by about five to seven times. The NTPC issue comes close on the heels of the massive investor response to the public offering of Tata Consultancy Services, India's largest software development and services firm. According to Prime Database, a primary market research firm, 27 companies have already raised 300.98 billion, excluding the NTPC issue, in the current calendar year. "Never in the history has so much amount been targeted to be raised at a given point of time as now," said Prithvi Haldea, managing director of New Delhi-based Prime Database. "The key characteristics of the current boom are combinations of well-established companies or promoters, divestments either by the government or by venture capitalist and follow-on offerings. "All this augurs well for the investors, the capital market and the economy." A Prime survey report says over 80 companies may raise another 400 billion in the domestic primary market in the near term. The prospective issuers include Haldia Petrochemicals, Mahanagar Gas, Power Finance, Power Grid, Bank of Baroda, Dena Bank, AB Corp, Cyber Media, Daksh, Deccan Chronicle Holdings, EXL Services, and Fortis Healthcare. "For this huge pipeline to mature and receive investors' support, correct pricing of the issues and the need for sustained sanity, if not buoyancy, of the secondary market is essential," said Haldea. "Any major fall in the secondary market shall surely put almost all of these issues back on the shelves."
Source: IANS