It was not too long ago that investors lined up to pour money into the initial public offerings (IPOs) of Reliance Power and Future Capital.
The sunny optimism in the Indian IPO market has quickly been replaced by clouds of doubt. We have seen last-minute reductions in offer prices and insipid responses to some of the IPOs that are now in the market.
Thomson Financial, a data tracking firm, has said in a new report released on Wednesday that India has saved the ailing global IPO market. This is true—at least till now.
A sustained bout of IPO trouble could have wider consequences. Companies have funded recent capacity expansions through internal accruals. They now need outside capital as well. With the foreign convertible bond market shut for business, it is natural for companies to line up outside the IPO mart. If they fail to get money there, companies may embrace the deadly option of high leverage.