Mumbai, India (PressExposure) July 05, 2011 -- The amount of money raised through initial public offerings in India fallen sharply in last six months as waning investor appetite for new issues prompts companies to postponing their listings plans.
Bankers and analysts say that market sentiment in India is being affected by successive interest rate rises designed to curb high inflation, recent scandals and more subdued economic growth forecasts. The BSE's benchmark Sensex index is trading down 8.5 per cent so far this year.
The weak market sentiment is also bad news for Delhi which is looking to continue its programme of stake sales in government-owned companies to raise billions of dollars for the state's coffers. Analysts are already saying the government will find it difficult to hit its Rs400bn ($9bn/£5.6bn) divestment target for 2011-12.
Last year's listing of a 10 per cent stake in Coal India raised $3.4bn and seen a strong performance since float. Companies such as Oil and Natural Gas Corporation, Steel Authority of India and Hindustan Copper are all due to sell stakes.
According to figures from data provider Dealogic, in the last six months there have been 22 listings in India raising a combined $780m, well down on the same period last year when just over $4bn was raised in India through 28 IPOs. Global IPO volumes for the year to date, meanwhile, are up 14 per cent at $114bn, buoyed by sizeable listings in Hong Kong and the US.
"Most Indian companies like to come to market at punchy valuations. But clearly the global market conditions over the past six months haven't given potential issuers the valuations they desire so they've kept away," said SaurabhMukherjea, head of equities at Ambit Capital in Mumbai.
Some 15 companies that secured the go-ahead to list from the Securities and Exchange Board of India have allowed their IPO approval from the regulator to lapse over the past six months, highlighting how cautious larger companies have become.
Sebi gives companies one year from the date of approval to launch an IPO.
JagannadhamThunuguntla, chief strategist at New Delhi-based SMC Global Securities, said it was significant that the list included a number of companies in sectors that have fallen out of favour with investors.
Share in many of the real estate that floated between 2007 and 2009 are trading are trading 60-80 per cent below their issue price, while those in the power sector are trading 30-50 per cent below.
"The perception of foreign investors has been subdued. The days of easy money are behind us. Almost every industry is suffering a headache," said MrThunuguntla.
Among the companies to allow their IPO approval to expire are Jindal Power, Sterlite Energy and Anil Ambani's Reliance Infratel, a mobile towers unit that is now in talks over a possible sale.