India becomes world’s seventh largest IPO market

By Vipin Agnihotri

The Indian economy is in full form, much like the Indian cricket team. According to experts, Indian companies are flocking to the stock markets in droves to raise capital.

It has come into the notice of The India Street that India has leapfrogged its way to number seven among the worlds biggest IPO markets in the first eight months of this year. In 2006, India was at 14^th position. Furthermore, share of Indian global IPO proceeds is now 3.5 per cent, compared to 1.7 per cent in 2006.

As a matter of fact, IPO mobilization so far this year, at $6.4 billion has already out numbered the $4.8 billion raised last year. In my opinion, the main factor behind this tremendous performance by India were DLFs $2.26-billion IPO, the biggest ever by an Indian company, Genpact $568 million IPO, Idea Cellular $555 million IPO and Power Finance Corporation $226 million IPO.

According to sources, number of IPOs is going to hit the Indian market in the coming months especially from retail and infrastructure companies. Point to be noted here is that the flurry of IPOs is driven by the extended bull run in the Indian equity markets.

No one will argue with the fact that the primary market normally gives better returns as compared to the secondary market in a rising market scenario. This pretty much signifies the retail and institutional interest in IPOs. In addition, interest rates have hardened over the last six months, enhancing the cost of borrowed money and compelling companies across the board to approach the primary market for economical funds in order to finance their expansion plans.

Interestingly, there is more action to come in the near future. In general, there are a big number of unlisted companies that need capital, especially in sectors such as real estate, media, retail, infrastructure and banking.

There is another significant factor that is playing a prominent part in fuelling this boom. Over the last two or three years, private equity investors have taken quite a bit of stakes in technology, media, telecom and pharma companies. They are now interested in making profitable exits.

Suggested Reading:

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• Monthly Review of India stock market – September 2007

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• ICICI Bank IPO - India Street Analysis ~ The India Street ...