Mumbai: Global initial public offerings (IPOs) have witnessed a significant slowdown in January, but the average returns on investments from India’s primary market issues, which accounted for 50% of the total primary market gatherings, have fallen marginally.
While investors gained 33% average returns on the last 50 IPOs, those in 2008 yielded more than 30%, even as India’s benchmark index, the Sensex, dropped from 20,286.99 points on 31 December to 17,758.64 on 31 January. The 30-stock index ended on Friday at 18,233.42, up 584.71, or 3.31%.
“There may not be a major slowdown in Indian IPOs or the returns from such issues,” said Vinay Menon, head of equity capital markets at Kotak Mahindra Capital Co. Ltd. “If the market sentiments improve, we will start witnessing richer valuations.”
Emaar MGF Land Ltd, a realty firm whose IPO subscriptions started on Friday, had slashed its price band by 11.4% to Rs540-630 per share.
“If not for India’s Reliance Power IPO, which raised nearly $3 billion (Rs11,820 crore), the global IPO market should have experienced a more significant decline,” said Thomson Financial’s capital market tracker.
In January this year, global IPO volumes from 45 deals were $6.3 billion—15.4% lower than in January 2007, when 65 issues had raised $7.5 billion. In January 2006, the global IPO volume was more than $8 billion. On Friday, shares of Future Capital Holdings Ltd listed on the National Stock Exchange at a premium of more than 41% at Rs1,081, against the issue price of Rs765. It was subscribed about 133 times.
According to www.greymarket.co.in, a website that tracks the potential listing value of an issuer’s stock from its offer price, the Reliance Power Ltd IPO will command about 30% premium on listing.
Reliance Power, an arm of the Reliance-Anil Dhirubhai Ambani Group, received bids worth Rs7.5 trillion, against the issue size of Rs11,560 crore, and will have about 4.2 million shareholders when it gets listed. Other big global IPOs in January include Petro Rabigh Co. of Saudi Arabia that raised $1.2 billion and Vietcombank of Vietnam that netted $673 million.
Both China and the US witnessed huge declines in IPO proceeds—China slid 72.6%, while the US dropped 46.1%.
The total value of public issues in India in 2008 could be worth Rs75,000 crore, according to New Delhi-based Prime Database, a primary market data provider. “We are expecting 150-175 public offers to collectively raise Rs75,000 crore,” said chief executive Prithvi Haldea.