'Citi to assist all client segments in India'

that Citi has shifted gears in India to assist all segments of the clients, in their capital mobilisation plans. Excerpts:

Is the market volatility posing problems for investment banks in attracting enough interest from retail investors?

Retail investors generally follow the institutional investors. The real challenge for bookrunners is to maintain the institutional momentum (for orders) from day one of the issue opening till the last day.

The margin money requirement forces institutional investors to decide the timing of the bid taking into consideration various aspects such as foreign exchange risks and cost of funds. The retail investors become more sensitive in volatile market conditions.

However, if the bookrunners are able to maintain institutional momentum through their global distribution network, retail investors get into an additional comfort zone and follow the cues.

As the sole book-running lead manager for the IPO of Motilal Oswal Financial (the issue was subscribed by over 27 times), we were able to maintain institutional investors' interest, though the issue hit the market in the midst of the US subprime crisis.

What's Citigroup Capital Markets' strategy in India in terms of pitching for mandates?

Citi is a mainstream capital market player in India and has capabilities and experience of delivering deals across all capital raising formats. This was demonstrated by the versatility in deals done this year.

We have done American Depository Receipts for Sterlite Industries and US common shares for Genpact, Global Depository Receipts for UTI Bank, London's AIM listing for Dev Property, Foreign Currency Convertible Bonds for JSW Steel and Moser Baer, Qualified Institutional Placements for GVK Power, IDFC, UTI Bank and Punj Lloyd, Initial Public Offerings (IPOs) for Idea Cellular, Fortis, DLF, Omaxe and Motilal Oswal, Rights Issue (forthcoming issue by Tata Steel), Singapore's First Listed Indian Property Trust for Ascendas India Trust and an innovative convertible bond called Convertible Alternative Reference Securities for Tata Motors and Tata Steel.

How critical is the stock market sentiment for IPOs to attract big interest from investors?

While a favourable market sentiment is necessary, it is also important for the investment banks to have innovative structuring capabilities, global distribution network and flawless execution to attract well informed and discerning investors.

What went wrong with Purvankara's IPO?

When the price band was decided by the book runners, the market conditions were good and feedback was positive. But, during the roadshows, global markets turned extremely volatile due to US sub prime problems and this adversely impacted the listed comparables' stock price.

In the light of market volatility, the book runners realised that the response at the initial price band will be muted and therefore took a decision to revise the price band.

There is nothing wrong in re-pricing an issue, particularly if it is done due to market volatility and to protect investors' interest. The Securities and Exchange Board of India also took a pragmatic view and gave us the go-ahead to revise the price band.

Are we seeing investor fatigue towards real estate IPOs? Also, are these fund mop-ups putting pressure on companies to make aggressive land purchases, thinning down their margins?

We don't think so. Real estate is a huge sector and is still under-owned by the investors. The capital market would be a key source of raising resources for real estate companies, especially those having sound fundamentals and sustainable growth.

The companies need to be judicious enough in their fund raising and utilizations, so that they continue to create wealth for the stakeholders. Aggressive land buying could potentially put pressure on margins and hence slow down value creation.

How do you assess the stock markets from here on, as we have seen a pull-out of over $2 billion by foreign institutional investors in August?

The Indian markets are maturing and have significantly deepened. This is reflected in the resilience shown by our markets in the last few weeks despite big FII selling in August. Local funds are also increasing in size, thereby countering the impact of FII withdrawal.

But, going forward, the fundamentals have to take over. We believe that once the subprime crisis is managed, the fundamentals of Indian economy and the performance of the Indian companies will be appropriately noticed and valued.