2 IPOs, bond seek to raise Rs 7,000 cr in next 2 weeks

Tags: News

Retail investors have interesting choices to end an otherwise dull year

As overseas investors gear up to take a break from their trading activity due to their year-end celebrations, several domestic private companies have lined up IPOs in order to mop-up funds aggregating nearly Rs 5,850 crore targeting foreign investors in the next couple of weeks.

After Bharti Infratel, a tower arm of telecom major Bharti Airtel, last week announced its plans to raise Rs 4,700 crore from the primary market, rating agency Care Ratings also followed suit, aiming to raise Rs 540 crore at the higher end of the price band. Add to this the IPO by PC Jeweller, which is also hitting the market in coming days; to raise Rs 609 crore for funding its expansion plans.

Besides, the IPO mart, several state-owned funds including Rural Electrification Corporation (REC), has lined up tax-free bonds to attract more retail participation. In the next one week, REC is looking to raise Rs 1,000 crore with an option to retain over subscription aggregating up to Rs 4,500 crore.

Bankers said the companies are raising the funds before the first two to three weeks of December as foreign investors — the major investor group in the share issuances, go on a long year-end holidays, before they come back may be January-end or February next year. They, however, felt that good flows from offshore investors will help the upcoming IPOs to sail through.

Raj Balakrishnan, MD and co-head investment banking at DSP-Merrill Lynch, said the flows from the overseas investors are very good and this will augur well for IPOs such as Bharti Infratel, which are lined up in the coming days. “I don’t think the IPOs will face a problem (just because they are coming in close succession)”, he told Financial Chronicle, on the sidelines of a IPO conference.

Rikesh Parikh, VP equities, Motilal Oswal Financial Services said, “FIIs have been allocating funds in India right from the start of 2012, and the recent government decision to open up FDI in retail and aviation besides steps to reduce subsidy burden has boosted the sentiment of overseas investors. With Bharti Infratel and Care Ratings taking the lead, there will be more clarity on the future of primary market front if both the issues get good response from across the investor fraternity.”

However, there are some who believe that the bunching up of IPOs during a short span of time may create problems.

Sudip Bandyopadhyay, MD & CEO, Destimoney Securities said, “My only concern is that two many issues are crowding the market at a very short span of time. I am confident of institutional participation in the upcoming issues, but how would be the response from retail side will have to be watched.”

India has already seen robust foreign fund inflows to the tune of Rs 1 lakh crore or nearly $20 billion in the current year so far, indicating the confidence shown in by the overseas investors at a time when several global economies are reeling under slowdown.

S Subramanaian, MD, investment banking division of Axis Capital, however, pointed out that the total amount expected to be mobilised in coming days was not even one billion dollars. “Our market capitalisation is more than $1trillion. The amount that is being raised through IPOs through two to three issues is not even one per cent of the market cap,” he said. In the early 1990s, companies used to raise money, which will be over 10 per cent of the market cap without any difficulty, he pointed out.

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