When real-estate giant DLF hits the capital market with its initial public offer (IPO) later this year, it might write a new chapter in the booming IPO market by becoming Asia’s biggest equity deal of 2007.
There are equity deals worth about $30 billion (Rs1.32 lakh crore) in the pipeline for this year across all Asian markets. Out of this, there are equity issues worth over $6 billion planned for the Indian market alone.
Among all the Indian deals in the pipeline this year, the biggest is from DLF, which is estimated to raise about $2.5 billion after a failed attempt in 2006.
The deal is set to become India’s biggest-ever public offer, but could yet be outsmarted by the public-sector banking giant State Bank of India (SBI), which is understood to be planning a follow-on offering worth Rs12,000 crore.
While there are new offers worth about $17 billion in the pipeline in China and Hong Kong, the Indian deals in the schedule are worth more than those in the rest of Asia.
There were 92 IPOs in 2006 raising about $5.54 billion, while about 100 IPO filings have already been made in less than two months this year, with an estimated total proceeds of about $6.3 billion. Analysts expect the momentum to further intensify in coming months and the total IPO proceeds for the year could surpass the record high amount of about $6.8 billion in 2004.
The total number of IPOs is expected to rise to about 150 in 2007, from just 34 in 2004, as the companies are increasingly turning towards the stock market to raise funds with rising interest rates dampening the prospects for debt funding.
The other billion-dollar Asian offers in the pipeline include four such deals in China/Hong Kong—Shanghai Automotive ($2 billion), China Citic Bank ($1.5 billion), China Pacific Insurance ($1 billion) and Shanxi Coking Coal ($1 billion)—as well as South Korean financial services major Industrial Bank of Korea, which plans to raise about $1 billion later this year.
Besides DLF, other major Indian deals in the pipeline include a $480-million issue from mobile operator Idea Cellular and a $650-million IPO from Coal India.
In addition, the country’s leading stock exchange, BSE, is also likely to come out with an issue worth more than $200 million, while commodity bourse Multi Commodity Exchange (MCX) might raise close to $100 million in an IPO.
The analysts also anticipate frantic IPO activities from media and brokerage firms, which together could raise about $1 billion. The continuing boom in the IPO market is not only quenching the thirst of capital-hungry corporates, it has also turned out to be a money spinner for investors.
A number of companies have listed at significant premium over their IPO price in the recent past, with stocks such as Global Broadcasting Network giving returns of more than 50% on the first day itself. Lured by robust returns given by new listings, venture capitals and private equity firms are also turning toward IPOs with cash proceeds from their earlier investments.
While painting an even rosier picture, the analysts believe that this year’s planned IPOs are coming from relatively broader-based and established companies in sectors like real estate, telecom, banking, IT, media, retail as well as spin-offs from the public-sector enterprises.