IPO buffet

The Indian initial public offer (IPO) market has always had more than its fair share of doomsayers.

Right from the Maruti issue, which pundits decried as being overpriced, to the ONGC and TCS issues, where the huge sizes of the offerings drew predictions of calamitous effects on the secondary markets, the opinions of the "experts" have proved to be wide off the mark.

Not only did the mega issues sail through, but the secondary markets proved to be far more resilient than anybody had anticipated. The data show that as much as Rs 23,904 crore has been raised from the primary market in the current calendar year, making it obvious that the Indian investor has far more appetite for equities than most people realise.

To be sure, a large part of the IPO appetite was the result of a great menu: most of the money has been raised by big companies with a long-term track record. A substantial number of issues""barring that of TCS""also happened during the early part of the year, before the markets got the shivers. The heavy oversubscriptions in many cases can also be traced to the availability of bank finance for IPO investment.

Nevertheless, there is no denying the enormous interest retail and other investors have shown in the primary market, perhaps even more so than in the secondary one.

This interest has been sustained despite the lack of bounce in the secondary market and is not confined to the big issues; even smaller issues have sailed through with large oversubscriptions.

If investors are gung-ho about IPOs, there are several reasons for it. Unlike earlier IPO booms, this one is being driven by a much better quality of offering. Missing in action so far are the fly-by-night operators of the 1990s who made public offers only to collect the money and vanish.

Next, most recent IPOs have resulted in gains on listing for the investor, and this has encouraged many of them to try their hand at playing stag. The listing gains have probably initiated a kind of virtuous cycle, tempting investors who have already made money to return to the primary market.

There is also reason to believe that companies are pricing their issues less aggressively this time, either due to general concerns about a volatile market, or because of a deliberate effort to leave something on the table for all investors. TCS is a case in point.

Companies have been quick to take advantage of the investor interest in IPOs, and banks, broking houses, retail outfits, media houses and government companies such as NTPC and Power Finance Corporation are lining up issues.

Even mutual funds have got into the act, and are tailoring their offerings to match current market fancies""mid-cap funds, dividend yield funds, and what-have-you. If the government wants to get some money into its kitty through disinvestment programmes, this is the time to make a dash for it.