NEW DELHI: Analysts say companies that were postponing their IPO plans for the last few years due to depressed market conditions may revive the process buoyed by the success of Maruti's offering, the first issue to hit the Indian market this fiscal. In an indication of the investor's craving for new issues, total bids surpassed the number of shares on offer by Maruti, a unit of Japanese automobile giant Suzuki Motor Corporation, on the opening day of the subscription process Thursday. "After a very long time a new public offering has received such a huge response," said Sanjeev Khandelwal, director of New Delhi-based Prime Database, a primary market research firm. "The success of Maruti's IPO certainly comes as a boost for the primary market. I think Maruti's success will tempt many other companies to rush to the market to raise fund," Khandelwal told IANS. "With interest rates on most saving options coming down gradually, the Indian investor today has few options for investment. Therefore, the investor appetite for quality IPO issues is increasing." Khandelwal said about half a dozen new public issues could hit the market in the current fiscal year as the success of Maruti's issue has fired hope that big, reputed companies can find buyers. "Many pending IPOs of companies like Tata Consultancy Services, LG Electronics and Hyundai Motor India are likely to finally see the light of day in this fiscal. These issues have been in the pipeline for the last one and a half years." The IPO of 72.24 million shares from Maruti, India's largest carmaker, is one of the largest to hit the domestic market in recent years. The issue received bids for 105.4 million shares on the very first day. Most of the bids were above the floor price of 115 a share. Analysts say the issue is likely to be oversubscribed by six to eight times when subscription closes on June 19. The Indian government, which holds 45.8 percent stake in Maruti, is divesting its 25 percent equity in the company through the IPO. The issue will raise a minimum 8.3 billion for the government. Suzuki Motor took management control of Maruti from the government in May 2002 as part of the latter's privatisation programme. The Japanese auto major holds a majority 54.2 percent stake. Maruti Udyog posted a 40 percent growth in net profit to 1.46 billion in the year to March 2003. The company's total revenue rose to 94.26 billion in 2002-03 from 93.98 billion in the previous fiscal year. "If investors get to make money in the Maruti issue, they will certainly get attracted towards other IPOs also," said Khandelwal of Prime Database. The number of new public issues was the lowest ever at six in 2002-03 and managed to mop up a total of just 10.39 billion, according to Prime Database. Neeraj Deewan, a senior analyst with brokerage firm Quantum Securities, said the success of the Maruti IPO might fuel hopes of fast sales of government stakes in other state-owned companies such as Bharat Petroleum and National Aluminium. The government intends to sell 20 percent in National Aluminium Company via a float in an overseas bourse and an additional 10 percent in the domestic market. It also plans to sell 10 percent of Bharat Petroleum in the domestic market. "The prospects of divestment of government equity in other public sector companies through public issues will certainly get enhanced following the positive investor response to Maruti's issue," Deewan said.
Source: IANS