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Liquidity, strong markets fuel bigger Indian IPOs

With the economy projected to post a robust growth of 9.2 per cent and factoring in the sound liquidity in the markets, this year's strong showing of the biggest ever funds raised — notably Rs91.87 billion by DLF despite worries of bubbles in the property sector — sets the stage for another record-breaking round.

This year alone, besides DLF, ICICI Bank raised Rs200 billion through an IPO in India and American Depository Receipts in the US. The fund-raising exercise by State Bank of India targeted later in this fiscal is anticipated to be another record-breaker — it is rumoured to top Rs145 billion.

Sparked by the money flush, enthusiasm among investors is certainly soaring and IPOs are seeing over-subscriptions of at least three-four times. The rally in the sensitive index (Sensex), the 30-share index benchmark of the Bombay Stock Exchange (BSE), pushed total investor wealth past the Rs50,000 billion for the first time Sep 21.

"We are seeing a lot of interest in the equities market. Listed companies are also going for secondary listing," said a senior investment banker in a local bank requesting anonymity, as he's not authorised to speak to the media.

"Valuations of the IPOs are fair and the trend is going towards larger size IPOs," he said, adding, "There are no constraints on liquidity...tremendous demand from investors - be it retail or institutional."

Another analyst from a securities firm saw more participation from real estate companies. "So far, the real estate sector has less representation. The trend is showing there will be more participation from property companies."

He, however, cautioned that the quality of companies seeking to float IPO is a big concern among the investment bankers.

"Quality has started to decline. There were a few companies without proven track record and there were those who don't have profit or loss for the past two to three years in their business. They couldn't show a proper balance sheet," he said.

"Everybody wants to cash in," he said, adding investors' appetite remained strong and would continue to remain upbeat, taking cues from the markets.