India 8th biggest IPO mkt: E & Y report

Stock markets continue to remain a key route for corporates to raise funds for expansion, with the worldwide IPOs space posting a record net proceeds of $246 billion in 2006, a new study shows.

India's IPO market emerged as the eighth largest with $7.23 billion (Rs 30,000 crore) in net proceeds through 78 public issues, global research and consultancy firm Ernst & Young said in its Global IPO report released on Wednesday.

Across the world, the companies raised $246 billion, up from $167 billion in 2005, through a total of 1,729 IPOs, led by Chinese companies at the top with net proceeds of $56.6 billion.

However, the biggest number of IPOs came from the US with 187 offerings, followed by Japan with 185 and China with 175 IPOs.

Mukesh Ambani Group's Reliance Petroleum, which raised $1.8 billion, featured in the global Top 20 IPOs, which together raised $84 billion, representing 35 per cent of the total capital raised by all IPOs, the report said.

"India's IPO market has been fairly broad-based in terms of transaction, although energy companies dominated with more than 50 per cent share of funds raised," it added.

According to the study, India's increasing number of larger deals has been driven by the growth of Indian corporations and their need for additional capital for potential acquisitions. "In 2007 Indian IPOs continue to surge in numbers. Continued strength is expected in the real estate and energy sector," it said.

"The rapid growth in emerging market economies has resulted in a migration of capital from the developed economies into the emerging markets," E&Y India's IPO Leader R Balachander said.

"The corporate sector is on a growth trajectory, which has significantly increased their capital market needs. India's latest and strongest capital-raising trends include localisation and qualified institutional placements," he said.

The localisation trend in India is evidenced by several billion-dollar IPOs hosted by Indian exchanges. In 2006, India's largest IPO, Reliance Petroleum raised $1.8 billion dollars, followed by the oil production and exploration company, Cairn Energy, which raised $1.3 billion with both companies listing on domestic exchanges.

However, some Indian companies are also listing abroad, especially London, Singapore and Luxembourg, primarily for higher valuations and visibility, the report noted.

Besides, the cross-border activity and the role of foreign capital continue to grow and FIIs make up three-fourths of new capital flowing into the market. The private equity rush into India is creating the potential for many IPO exits.

In 2006, private equity firms invested more than $7 billion in India. Top global private equity funds as well as local funds, have been key drivers of Indian IPO markets, Balachander said.