A host of companies plan to cash in on the spending boom.
Domino’s Pizza Inc’s Indian franchise, a gym chain and a developer of games for Sony Corp’s PlayStation, plans to sell shares in India, riding a boom in spending in the world’s second-fastest growing major economy.
Jubilant Foodworks Ltd, operator of Ann Arbor, Michigan-based Domino’s Pizza stores, will sell a 36 per cent stake and animator DQ Entertainment (International) Ltd will offload 25 per cent, among 48 companies planning first-time share sales, according to data compiled by Bloomberg. Talwalkars Better Value Fitness Ltd intends to sell a 25 per cent holding in the next three months, adviser India Infoline Ltd said.
An education company, tour operator and chain of resorts generated three of the top four returns for Indian IPOs this year, outperforming the biggest rally in stocks in 18 years. Consumers drive half the growth in India, one of only two among the world’s 15 largest economies that expanded last quarter.
“Investors like the consumer play stories,” Donald D’Souza, investment banking president at India Infoline, said in a telephone interview in Mumbai. “India has a huge consumption theme where discretionary spending power offers investors a more stable and sustainable business model.”
Indian companies have announced plans to raise at least $5 billion next year, compared with $16 billion in 2009, according to Bloomberg data. Share sales may rise to $20 billion by the end of 2010, according to D’Souza.
Demographic play
Consumer-related IPOs include Hathway Cable & Datacom Ltd, India’s largest cable television operator, and Cantabil Retail India Ltd, a branded apparel maker with about 400 stores.
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“These industries are a play on the country’s demographics,” said Jayesh Shroff, who helps manage $8.3 billion in assets at SBI Asset Management Co. in Mumbai. “These businesses of gyms, pizza chains are industries of the young people and hugely leveraged on this demographic segment.”
SBI bought shares in Cox & Kings (India) Ltd, the tour operator partly owned by a unit of Deutsche Bank AG. The stock has surged 31 per cent since the Mumbai-based company raised Rs 610 crore last month, the fourth-best return from an IPO.
Mahindra Holidays & Resorts India Ltd, owner of the Club Mahindra Holidays brand, returned 48 per cent since its Rs 280-crore IPO in June, the third best performance for an initial share sale in India.
Best returns
Edserv Softsystems Ltd, a provider of information technology training and placement services, gave investors the best returns from an IPO, jumping 280 per cent since its Rs 23.8-crore offer in February.
India’s economy will grow at the fastest pace after China among the Group of 20 nations next year, according to the International Monetary Fund. The $1.2 trillion economy expanded 7.9 per cent in the three months ended September 30 from a year earlier, the quickest pace in six quarters.
Faster growth has attracted the second-highest inflows from overseas investors this year, driving a 79 per cent rise in India’s benchmark Sensitive Index, the most since 1991.
Jubilant Foodworks, based in New Delhi, will raise funds to add to the 279 stores it operates for the US’s second-largest pizza chain in India and Sri Lanka, according to a filing to the regulator. The India Private Equity Fund (Mauritius) and Indocean Pizza Holding Ltd. that bought stakes in the Pizza chain in 1999 will sell their entire 32 percent holding in the offer, arranged by Kotak Mahindra Capital Co.