IPOs begin to feel the heat

Primary markets are set to bear the brunt of the carnage in the secondary markets. Several planned initial public offerings (IPOs) are believed to have been postponed because of the tumble the stock markets have taken.

Investment bankers are taking a close look at the schedules drawn up for some of the IPOs and may delay the floats as the companies wait for the market sentiment to improve.

The Sensex shedding over 14 per cent in a week's time has put a big question mark on how impending IPOs can be priced, say merchant bankers.

"Corporations, in view of this volatility, may prefer to defer the setting up of the price band for their IPOs till there is a bit of stability in the market. This is notwithstanding the fact that fundamental factors for the market have not changed," said S Ramesh, executive director, Kotak Investment Banking.

The primary market has been very active. Over 40 offer documents have been filed with the Securities and Exchange Board of India (Sebi), in the last three months for new floats. The buoyancy in the secondary market had led to record levels of application and over-subscription in recent issues.

Real estate major DLF Universal is expected to be the next big IPO to hit the market. Sources close to the deal said a decision on the exact date of the issue was yet to be taken and hoped the market would stabilise and outlive the current choppiness by then.

Merchant banking sources said that IPOs scheduled for June and July were now following a wait and watch policy before committing a date to the offer. Currently, the Deccan Aviation IPO is open and has received a tepid response.