BOMBAY: The strong investor response to some US$3bil worth of recent government share sales is expected to embolden India’s private sector firms to storm the market with a slew of initial public offerings (IPOs) later this year.
Bankers expect Indian firms to raise a record US$5bil or more via equity sales in 2004, with many of them tapping the Bombay stock market for the first time. Analysts say many will be taking their cue from the government, in particular its record sale of shares in Oil and Natural Gas Corp (ONGC).
“It has given confidence that large-sized deals could be cleared in India,” said Ravi Kapoor, head of equity capital markets at DSP Merrill Lynch. “It underscores the continued demand for Indian paper.”
Fund managers say an IPO rush from Australia to China is likely to generate interest for Indian issues. India’s projected 8% economic growth is a draw, too, and bankers expect activity to pick up once elections are out of the way in May.
Five share sales by India’s deficit-conscious government have already raised US$805mil. The sale of 10% of ONGC, subscribed five times so far, should raise well over US$2bil.
“What comes out very clearly is that size is not an issue for large, quality companies,” said Ajay Sondhi, head of investment banking at Kotak Mahindra Capital Co, which was involved with other banks in four of the six government issues.
The banks arranging the offerings are local joint ventures of top Wall Street firms Merrill Lynch and Morgan Stanley, global bank HSBC Holdings, as well as local players such as ICICI Securities, SBI Capital Markets, and Kotak Mahindra Capital Co.
The previous record for stock sales in India was set in 1995, when some 1,400 Indian companies raised about US$2.15bil through equity issues, according to New Delhi-based Prime Database. The ONGC sale alone will put 2004 on top of the table.
Likely IPO candidates this year include telecoms companies such as mobile operator Idea Cellular Ltd, the Indian unit of Hong Kong’s Hutchison Whampoa, and Reliance Infocomm, the telecoms arm of Reliance Industries Ltd, bankers say.
Broadcasters Sony Entertainment Television and NDTV India, and the local units of South Korea’s LG Electronics and Hyundai Motor Co are also said to be among those planning floats.
Analysts say the success of ONGC’s blockbuster sale could even expedite a much-awaited offer from outsourcing leader Tata Consultancy Services, expected to raise about US$700mil. – Reuters