Indian investors eye bonanza in public issues
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Indian investors eye bonanza in public issues

By siliconindia staff writer   |   Thursday, 19 February 2004, 08:00 Hrs
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NEW DELHI: India's biggest ever public issue season is set to begin soon, with a host of public sector and privately owned companies queuing up to tap the investor appetite in a booming share market.

In what analysts say will be the busiest session in the Indian share market's history, as many as seven state-owned companies will float shares over the next one and a half months to raise a whopping Rs 150 billion ($3.3 billion).

A host of initial public offerings from private sector companies are also set to hit the market to raise capital.

"The next couple of months are certainly going to be very hectic for the Indian equity market. The market has never seen so many big-ticket issues in a single calendar year," said Prime Database director Sanjeev Khandelwal.

"The timing is absolutely perfect to float initial public offerings in the market. First of all, the stock market is booming and people are becoming more interested in investing in equities," Khandelwal told IANS.

"Secondly, the economy is on the upswing. The sharp economic recovery has triggered hopes that most domestic companies would post sharply higher profits in the current fiscal year."

The public issue fiesta on the bourses will be led by the Indian Government that has lined up equity offerings from as many as half a dozen public sector companies as part of its ambitious privatisation drive.

The Government will offload its residual stakes through initial public offerings over the next six weeks in five firms in which it has already shed management control in recent years.

The firms are Computer Maintenance Corp (CMC), Indian Petrochemicals Corp (IPCL), telecom giant Videsh Sanchar Nigam Ltd (VSNL), petroleum retailer IBP and Bharat Aluminium Company (Balco).

In addition, the Government also plans to sell 10 per cent of its equity in profit-making energy giants Oil and Natural Gas Corporation (ONGC) and the Gas Authority of India Ltd (GAIL).

The ONGC public issue, the country's largest company by market capitalisation, could rake in a whopping Rs 110 billion ($2.5 billion) alone, making it the country's biggest-ever public offering.

The Government plans to float public issues of these companies before the end of the current fiscal ending March 31 to meet its budgetary target of privatisation proceeds.

New Delhi has set a target of raising Rs 132 billion ($2.91 billion) in 2003-04 by selling its shares in blue-chip public sector units, but has so far managed to generate a meagre Rs 13.35 billion ($295 million).

According to capital market research firm Prime Database, as many as 30 offer documents are awaiting the capital market regulator's approval to raise a whopping Rs 162.54 billion ($3.59 billion) over the next few months.

In the April-January period of the current fiscal, only 16 public issues were launched in the market that raised just Rs 25.15 billion ($555.67 million), said the market research firm.

"In case all these issues are able to hit the market during the January to March period, the quarter's figure would far outscore even the highest annual amount of Rs 133.12 billion ($2.94 billion) that was achieved in 1994-95," said Khandelwal.

The Bombay Stock Exchange index soared 73 per cent in 2003 over the previous year, making it one of the best performing markets in Asia, mainly on the back of a record Rs 303 billion ($6.7 billion) foreign institutional investment.

The market touched its all-time high of 6249.60 points in the first week of January on large-scale across-the-board buying triggered by hopes of a sharply higher economic growth in the current fiscal.

India is set to become one of the fastest-growing economies this year, perhaps surpassed only by China. India's October-December 2003 gross domestic product increased 8.4 per cent from its previous year's level.

"Investor appetite for quality issues at this moment is very strong and, therefore, most new public offerings are expected to witness a good response," said senior analyst with brokerage firm Quantum Securities, Neeraj Deewan.

"The overall success of new issues will, however, depend on the pricing strategy as well. A sharply higher than expected pricing of new issues could act as a spoilsport," added Deewan.



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