IPO-bound may have to pare valuations
The Economic Times, September 9, 2009, Page 1
Poor Show By Adani, NHPC Prompts Rethink; QIPs Seem More Appealing To HNIs
Arun Kumar & Deeptha Rajkumar NEW DELHI MUMBAI
COMPANIES on the threshold of going public may have to settle for lower valuations after the lukewarm response to two recently-listed highprofile scrips, said bankers, who see prices in the overheated primary market dropping to realistic levels. Share prices of Adani Power and NHPC, two issues that were heavily subscribed, have already fallen below their offer prices. “The poor performance of these IPOs wi
ll bring some sanity in the market,” said Samir Arora of Helios Capital, adding this “would certainly bring down the expectation of the promoters”. Around 25 companies, including Lodha Developers, Sahara Prime City, Emaar MGF, Den Network and Great Eastern Energy Corporation, are expected to file draft red herring prospectuses by the end of this quarter. Of this, more than a third are from the real estate sector. “Indian companies are planning to mop up more than Rs 50,000 crore from the market through primary issues in the current financial year,” said a banker with ICICI Securities who asked not to be named. A combination of factors such as high valuations and the absence of a mechanism to hedge the risk could make high net worth individuals (HNIs) and institutional investors sceptical of IPOs. Active participation of HNIs and institutions is key to the success of IPOs.
Indian promoters believe in price perfection, said Madhu Kela of Reliance Mutual Fund. “What is important is how much they leave on the table for the investors so that there is sufficient cushion to insulate investors from downside risk,” he said.
Banking circles are already abuzz with talk of issues being priced more competitively, keeping in mind volatile market conditions. “Prices will have to be competitive if you want the (IPO) market to sustain,” said Fortune Financial Services MD Nimish Shah.
The Economic Times, September 9, 2009, Page 1
Poor Show By Adani, NHPC Prompts Rethink; QIPs Seem More Appealing To HNIs
Arun Kumar & Deeptha Rajkumar NEW DELHI MUMBAI
COMPANIES on the threshold of going public may have to settle for lower valuations after the lukewarm response to two recently-listed highprofile scrips, said bankers, who see prices in the overheated primary market dropping to realistic levels. Share prices of Adani Power and NHPC, two issues that were heavily subscribed, have already fallen below their offer prices. “The poor performance of these IPOs wi
ll bring some sanity in the market,” said Samir Arora of Helios Capital, adding this “would certainly bring down the expectation of the promoters”. Around 25 companies, including Lodha Developers, Sahara Prime City, Emaar MGF, Den Network and Great Eastern Energy Corporation, are expected to file draft red herring prospectuses by the end of this quarter. Of this, more than a third are from the real estate sector. “Indian companies are planning to mop up more than Rs 50,000 crore from the market through primary issues in the current financial year,” said a banker with ICICI Securities who asked not to be named. A combination of factors such as high valuations and the absence of a mechanism to hedge the risk could make high net worth individuals (HNIs) and institutional investors sceptical of IPOs. Active participation of HNIs and institutions is key to the success of IPOs.Indian promoters believe in price perfection, said Madhu Kela of Reliance Mutual Fund. “What is important is how much they leave on the table for the investors so that there is sufficient cushion to insulate investors from downside risk,” he said.
Banking circles are already abuzz with talk of issues being priced more competitively, keeping in mind volatile market conditions. “Prices will have to be competitive if you want the (IPO) market to sustain,” said Fortune Financial Services MD Nimish Shah.
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