The dead primary market could once again come to life. According to some investment bankers, companies have initiated talks for floating public issues as soon as the stock market stabilises.
The revival in the secondary market has renewed hopes for promoters who have been waiting to raise funds through initial public offers (IPOs). It will also open an exit window for many strategic investors in unlisted firms who are stuck as markets slumped in one of the worst global economic meltdowns of all times.
Informed sources said that Ramky Infrastructure, Man Infra Construction and Rishabh Developers are some of the companies which have started talks with investment bankers for a public issue in the next few months. Adani Power has already filed its draft prospectus with market regulator Securities and Exchange Board of India for raising Rs 2,200 crore from the primary market. Godrej Properties too is believed to be engaged in discussions with merchant bankers for raising funds from a public issue.
However, investment bankers are divided on the time the primary market will take to revive. According to some investment bankers, it could take two or three quarters, while others feel if the pace of the recovery in the secondary market continues, the revival may come in the next three or four months.
“There is more optimism in global as well as Indian markets now. The economy seems to be recovering from its lows. One of the changes that we have seen is that people have at least started to plan which they could not four months ago,” said Saffron Asset Advisors Managing Director Ajoy Veer Kapoor.
Merchant bankers said that some public sector companies will be the first to tap the primary market once the situation stabilises. These include NHPC, Oil India and RITES – public issues which had to be put on hold after the market sank. “This could probably kick-start the sleeping IPO market as these companies are decently valued and cross-subsidised by the government,” said an investment banker on the condition of anonymity.
Some experts said that valuations and liquidity are still matters of concern. “There is still a valuation mismatch between promoters and investors. However, when the market goes up, that gap will narrow,” said Centrum Capital Managing Director Munesh Khanna.
“Liquidity is favourable at the moment but a lot depends on the outcome of the general elections. Banks have liquidity and flows from foreign institutional investors too have been positive,” said Ambit Corporate Finance Director Gautam Gupte. FIIs have pumped in Rs 356.50 crore in to the market till April this year.
Last year, 22 firms had to let lapse their approvals as the market went into a tailspin after the collapse of Lehman Brothers in September. Hence, the number of IPOs in 2008 fell to 37 from 100 in 2007. The amount raised too fell drastically from Rs 34,179 crore in 2007 to 16,904 crore in 2008.
