Mumbai: The initial public offering (IPO) of Reliance Power Ltd, which could raise around Rs11,700 crore, will be the first of several big-ticket IPOs that will hit the market in 2008, according to investment bankers.
These bankers estimate that Rs60,000-75,000 crore could be raised through IPOs and FPOs (or follow-on public offers) during the year.
“Many Rs1,000 crore-plus IPOs are lined up to hit the market early this year,” says a senior banker who is currently working on some large transactions including that of Reliance Power. According to this banker, who does not wish to be identified, the number of Rs5,000 crore-plus issues in 2008 will also be more than that in previous years.
In 2007, 105 public issues raised Rs39,387.72 crore, aided by the Rs8,898.38 crore FPO by ICICI Bank Ltd and the Rs9,187 crore DLF Ltd IPO. Three out of every 10 stocks that were listed on Indian bourses last year offered more than 100% return to investors. In 2006, 95 public issues raised Rs24,925 crore.
The Reliance Power IPO that opens on 15 January will collect around Rs11,700 crore if the issue is priced at the upper end of the price band. The IPO, which will follow the book-building route, is priced in the Rs405-450 price band. Under the book-building process, investors bid for the price they are willing to pay for a stock, within a prescribed band. The offer price is fixed based on the response of investors.
This issue, the largest ever by an Indian company, will beat the record set by the public issue of New Delhi-based realtor DLF in mid-2007.
Some big public equity issues (above Rs1,000 crore) that could hit the market this year include those of real estate developer Emaar MGF Land Ltd, construction company Ideal Road Builders Ltd and Wockhardt Hospitals.
State-owned firms such as Oil India Ltd, National Hydroelectric Power Corp. Ltd and Rural Electrification Corp. Ltd are also expected to sell shares to the public in early 2008.
The total value of public issues in 2008 could be as high as Rs75,000 crore, according to New Delhi-based Prime Database, a primary market data provider.
“If the secondary market does not become extremely volatile, we are expecting 150-175 IPOs to collectively raise Rs60,000 crore in 2008. There could be another Rs15,000 crore worth of follow-on public issues,” says Prithvi Haldea, chief executive of Prime Database.
The timing of issues is no longer a concern for bankers and promoters unlike in the past when large issues were timed to keep a safe distance from one another, says another banker who does not wish to be identified.
“The promoters (owners) are no longer concerned about the timing even in the case of big transactions. This indicates the depth and strength of India’s market,” he adds.
Another senior banker with a foreign investment bank says the huge volume of IPOs expected in 2008 is because of the large number of power and real estate companies tapping the market.
Lodha Builders Ltd, JSW Energy Ltd, Sterlite Energy Ltd, Jaiprakash Power Ventures Ltd and Coal India Ltd are among the companies expected to make public issues in 2008.
Ashwin Ramarathinam contributed to this story.