Dalal Street may soon become an abode for Rs 100 trillion worth of wealth by the virtue of India Inc's capital raising spree from public issues alone and without much support from the secondary market.
The underlying public issues are currently estimated at around Rs 2,00,000 crore (Rs 2000 billion), which includes mostly big-ticket initial public offerings. Even with an average dilution of 10% of equity in these IPOs, the public issues could easily add close to Rs 20,00,000 crore to investors' existing wealth, marketmen believe. This would take the total wealth invested on bourses, measured in terms of cumulative market capitalisation of all the listed companies in India, to close to Rs 100,00,000 crore (Rs 100,000 billion), from more than Rs 75,00,000 (Rs 75,000 billion) currently.
"The (public issue) pipeline is presently Rs 1,90,000 crore (Rs 1,900 billion) strong," primary market tracking firm Prime Database's Prithvi Haldea said, while adding that a strong issuer pipeline is well accompanied by huge investors' appetite. However, the success of IPOs depend considerably on the secondary market conditions, the experts believe. "Secondary market needs to remain stable, if not buoyant, and scam-free. The present conditions continue to offer an excellent opportunity to channelise household savings into the economy through the capital market," Haldea said.
According to Prime Database, capital mobilisation would be over Rs 35,000 crore (Rs 350 billion) from 70 public issues alone, for which documents have already been filed with market regulator Sebi, while the year 2008 could see close to Rs 75,000 crore (Rs 750 billion) being raised collectively through all public issues plan underway. Besides, investment bankers are being sounded out by a host of other corporates for their probable IPOs and plans could be put in place soon for these public issues.
According to bankers, the IPO action this year and in the near future would be led by power and infrastructure sectors, which could account for at least half of the total issue proceeds estimated for 2008.
Anil Ambani Group's Reliance Power is the first major IPO to hit the bourses and the four-day bidding process would begin on January 15. It is looking to raise close to Rs 11,700 crore (Rs 117 billion) and the company's market cap is estimated at around Rs 1,00,000 crore (Rs 1000 billion) even if it lists at the lower end of the price band of Rs 405-450 a share in first week of February.
"India Inc is in an upbeat mood when it comes to raising funds from the market and power and infrastructure sectors would be among the most exciting areas going forward," ICICI Securities MD and CEO S Mukherji told PTI.
"These are some highly-capitalised industries with huge capital needs. Sectors like power are set for some big action, with the entry of private players having been dominated by public sector since long," Mukherji said.
The rally would be dominated by power, real estate and financial services, but would not be concentrated to one or two sectors, Haldea said, adding that a buoyant secondary market and handsome post-listing gains on almost all IPOs in the past two years are making the IPO space attractive.
According to Prime Database, there are 150-175 public issues already lined up for 2008 eyeing estimated proceeds of Rs 75,000 crore (Rs 750 billion), including about Rs 60,000 crore (Rs 600 billion) through IPOs and about Rs 15,000 crore (Rs 150 billion) through FPOs.
Besides, market anticipates further 50-75 issues to come up as the year progresses.
The expected IPO proceeds of Rs 75,000 crore (Rs 750 billion) would easily surpass the previous record of Rs 45,176 crore (Rs 451.76 billion) scaled in 2007 and would be much higher than Rs 24,679 crore (Rs 246.79 billion) raised in 2006.
Reliance Power, touted as India's biggest ever IPO, would be followed by a host of other IPOs in the power sector. Key among these would be offerings from REC, NHPC, North Eastern Electric Power Corporation, Essar Power, Jaiprakash Power Ventures, JSW Energy and Sterlite Energy.
"After Reliance Power, there are quite a few big IPOs coming up such as Oil India and Emaar MGF," investment banking firm JM Financial's MD and Co-CEO Atul Mehra said.
"With part-payments-like facilities in big IPOs such as Reliance Power, smaller issues may also benefit as investors would not have to block all the money in one issue," he noted.
After power, real estate and construction space is abuzz with IPO action with issues lined up by companies like Emaar MGF, Gammon Infra, IRB infra, J Kumar infraprojects and KNR Constructions. Over 30 companies in the infrastructure sector have already filed their documents.
Besides, Canara Bank, Syndicate Bank, UCO Bank and United Bank have lined up their FPO plans. The expected IPOs from the financial services sector include Anand Rathi, Angel Broking, Microsec and UTI AMC, according to Prime Database.
The telecom sector may also see Aircel, Bharti Infratel, Indus Towers and Onmobile coming out with their IPOs, while IT sector's expected public issues could be from Birlasoft, GSS America, IBS, ITC Infotech, L&T Infotech, Servion, Xenitis and Ybrant. In the media sector, IPOs from DB Corp, DT Cinemas, DQ Entertainment, RGV Film and Set India are expected.
Health sector would see share sale from Avestha, Corvine, Glenmark, Intas, Max Healthcare, Unimark and Wockhardt Hospitals. While retail sector would come out with IPOs of Ebony Retail, Great Wholesale Club, Hidesign, Multiple Zones, Reliance Retail, Spencer Retail and Subhiksha.
Some major issues in the pipeline from the other sectors include Cox & Kings, Mahindra Holiday Resorts, Metro Tyres, Pride Hotels and VRL Logistics.
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