India's booming stock market to see wave of new bank IPOs
NEW DELHI: Market observers say at least half a dozen bank issues are likely to hit the market by the end of the current fiscal (March 31, 2004) to take advantage of the upbeat investor mood on the bourses.
The seemingly never-ending rally on the bourses has already helped the key share market index to register a gain of over 24 percent since January 1.
The stock market barometer 30-share Bombay Stock Exchange sensitive index, or Sensex, has gained nearly 44 percent since touching a six-month low on April 25.
"The magic is back on the bourses and so are the plans to launch new public issues after all these years of depressed market conditions," said Sanjeev Khandelwal, director of Prime Database, a primary market research firm.
"Many banking companies that had kept their IPO plans on the backburner for years due to poor investor appetite for shares are now rushing to take advantage of the boom," Khandelwal told IANS.
At least two state-run banks are planning to float public equity issues in the next one week to raise a total of around 5 billion.
While United Commercial Bank (UCO Bank) is launching the selling process of 200 million shares at 12 each on September 3, the Indian Overseas Bank's issue of 100 million shares at 24 per share will hit the market two days later.
Vijaya Bank, another state-run bank, has filed a draft prospectus with capital market watchdog Securities and Exchange Board of India (SEBI) to issue 100 million shares at a price of between 20 and 24 per share.
Industry sources say the issue of Vijaya Bank is likely to be launched within a couple of months of getting approval from SEBI.
Punjab and Sind Bank is reportedly planning an IPO of 1 billion to enhance its capital base and help fund the future business requirements.
According to New Delhi-based Prime database, the number of new public issues in the last fiscal year was the lowest ever at six that managed to mop up a total of just 10.39 billion.
"This year, however, the number of new issues is likely to be sharply higher on the launch of at least half a dozen bank IPOs. Banking companies will rev up the market and others will follow suit," said Khandelwal.
In the current fiscal year, only one IPO has so far been launched. Maruti Udyog Ltd, India's largest carmaker, launched its public issues in June this year.
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 Corp, on the opening day of the subscription process.
"There are two main reasons behind the launch of a slew of bank issues this year - first is the success of the Maruti IPO and second is the boom in the share market," said Neeraj Deewan, a senior analyst with Quantum Securities.
Indian stocks had remained dormant since the dotcom bust around three years ago. A flood of accusations of shady dealing and stock price manipulation had also kept the investors away from the market.
The prospects of sharply higher economic growth in the current fiscal year boosted by normal monsoon rains has, however, enthused share investors in a big way in recent months.
The Reserve Bank of India, the country's central bank, said Wednesday the earlier economic growth projection should now be exceeded significantly in light of the expected strong agricultural recovery.
The RBI had in April made a projection of six percent growth for 2003-04. India's agriculture-reliant economy grew by a moderate 4.2 percent during 2002-03 on a sharp dip in agriculture output.
Analysts say an improved financial performance by banking companies in the last fiscal year and hopes of robust earnings growth this year would ensure the success of the banks' public issues on the bourses.
"The general feeling is there would be high corporate profits this year because the economy is doing well. Loan off-take would continue to rise and banks will continue to work towards recovering their bad loans," said Deewan.
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