Mumbai: Indian initial share sales slumped 46% in 2008 as a record decline in the benchmark index spurred investors to shun stocks and Emaar MGF Land Ltd and Jaiprakash Power Ventures Ltd to cancel offers.
First-time stock sales led by Reliance Power Ltd declined to Rs18,300 crore from Rs33,800 crore in 2007, according to data compiled by Bloomberg. Only one Indian company completed an initial public offering, or IPO, in the fourth quarter, compared with 19 in the last three months of 2007, the data showed.
The Bombay Stock Exchange’s Sensex index more than halved in value last year and the rupee slumped to a record low as the deepest global slump since the 1930s cut off funds for companies. Sliding interest rates and falling crude oil and commodity prices may help revive offerings after nationwide elections due by May, according to A. Balasubramaniam at Birla Sun Life Asset Management Co. Ltd.
“Equities could take some time to rebound, which probably may happen after the elections,” said Balasubramaniam, who manages about $7 billion (Rs34,090 crore) as chief investment officer in Mumbai. “Even if the recovery happens, it may not match 2007.”
Deutsche Bank AG was the top ranked arranger of Indian IPOs last year, from 10th in 2007, after arranging Reliance Power’s record initial sale.
Kotak Mahindra Bank Ltd, the leader in 2007 and a former partner of Goldman Sachs Group Inc. in India, fell to third place as clients—including Emaar, controlled by the biggest West Asian developer, and Wockhardt Hospitals Ltd— scrapped share sales.
While Reliance Power, controlled by billionaire Anil Ambani, raised $3 billion when the stock market peaked in January, Ambani later had to scrap a sale by his telecom infrastructure company Reliance Infratel Ltd.
Ambani on 30 December said he may revive the Reliance Infratel offer this year if the market recovers. Investors have lost more than half their investment in Reliance Power.
The slumping equity markets forced many companies to resort to rights offers, which nearly quadrupled to Rs29,700 crore in 2008, according to Bloomberg data.
The rights sales by Tata Motors Ltd, the country’s biggest truck maker that bought JaguarLand Rover, and aluminium maker Hindalco Industries Ltd, which bought Novelis Inc., had to be purchased by the groups’ founders as investors shunned the stocks.
Private equity sales to institutions also slumped in 2008, even after the Securities and Exchange Board of India changed pricing rules to facilitate quicker offers.
Unitech Ltd, the country’s second largest real estate developer, had to abandon a private sale intended to repay debt and fund new projects after its stock plunged 92%.
The global credit crisis that caused more than $1 trillion in writedowns and losses for banks including Citigroup Inc. and JPMorgan Chase and Co. pared fund-raisings through convertible bonds.
Foreign currency convertible bond sales tumbled 94% to Rs42.4 crore last year from Rs750 crore, according to Bloomberg data.