Mumbai: The surge in the stock market has prompted several companies seeking to take advantage of the positive investor sentiment to launch share sales, sparking the kind of activity not seen since April. Those selling stock include a solar power equipment maker, a brokerage-cum-lender, a movie distributor, a printing ink producer and a tutorial service firm.
Investor sentiment has turned positive over the past couple of weeks, lifting stock prices globally. The Bombay Stock Exchange benchmark Sensex has been a key beneficiary, crossing the 19,000 mark on Monday, the first time it has done so since January 2008. It closed at 19,346.96 points on Tuesday, up 0.72%.
“Markets are good. The FII (foreign institutional investor) money is returning. That is key,” said Rajnish Roy, vice-president, capital markets group, SBI Capital Markets Ltd, the lead manager for one of the issues currently open. “We ourselves will be launching three more issues in the next few days.”
The share sales this week will raise a total of around Rs1,000 crore. Among those currently open are the Rs 350 crore initial public offering (IPO) of Indosolar Ltd and the Rs 51 crore follow-on public offering (FPO) of Tirupati Inks Ltd.
The IPO of Career Point Infosystems Ltd (Rs 115 crore) opens on Wednesday, while those of Eros International Media Ltd (Rs 357 crore) and Microsec Financial Services Ltd (Rs 148 cr) will open on Thursday.
Investment bankers said this rush marks the beginning of a round of money raising that will gain momentum over the next month. At least 10 firms from various sectors are planning to sell shares over the next few weeks. Bankers estimate these will raise Rs 3,000-4,000 crore, before the mammoth Coal India Ltd issue opens late October.
Such a burst of activity last took place when the government kicked off asset sales with the Rs 1,079 crore IPO of SJVN Ltd in April. Activity slowed as the Sensex stayed in a narrow range of 17,000-18,000, signalling indecision among investors. In May, there were no IPOs or FPOs. Between June and August, 10 firms raised Rs 4,162 crore. In contrast, in the first four months of the calendar year, 30 firms raised at least Rs 31,000 crore.
Bankers also said a number of midsize companies will try to cash in on the rally before?24 October when the state-owned Coal India is expected to launch its IPO that could raise Rs 14,000-17,000 crore according to various estimates.
Companies see the period before the Coal India sale as a window of opportunity.
“The secondary market is good and there is a fear that some large forthcoming public issues of state-owned companies may sideline the smaller floats of private sector firms,” said A. Murugappan, executive director, ICICI Securities Ltd, a local investment bank. “Rs 3,000-4,000 crore is estimated to be raised before the IPO of Coal India.”
Companies planning to raise Rs 800-1,000 crore want to get their offers in before that, added Roy of SBI Capital. “The Coal India IPO will be a big pinch on them.”
A number of firms that have approvals from capital market regulator Securities and Exchange Board of India (Sebi) to raise funds have not sold shares for fear of investor apathy and poor valuation. Since April 2009, at least 195 firms have filed their offer documents with Sebi. Of these, 141 have received clearances, but only 64 have hit the market.
Though these clearances are valid for a year, companies will have to update their documents as of 30 September if they are planning to raise money after that date. Many firms, which want to avoid the additional compliance and regulatory effort that this will entail, are also rushing to the market.
“Companies would be required to submit fresh audit of their quarterly numbers if they raise capital after September. At present they can do it with March numbers,” said Murugappan.
The Coal India IPO will still leave enough money for other companies, according to Pradeep Dokania, chairman, global wealth and investment management, India, DSP Merrill Lynch Ltd.
“The IPO rush is primarily because of the buoyancy in secondary markets and healthy liquidity. There is enough liquidity in the market to absorb all these issues including the big issue of Coal India,” he said. “And, only 10-25% of the money is retail. As long as the flow of institutional money continues, there should not be any concern.”