It's tough going for new issues
Increasing institutionalisation of the Indian primary markets has led to a dramatic fall in the number of IPOs over the past few years.
By Narayan Bhatt, TNN |
AHMEDABAD: Increasing institutionalisation of the Indian primary markets has led to a dramatic fall in the number of IPOs over the past few years, even as the amount being raised by companies on average has shot up.
During the four year-period from 1993-94 to 1996-97, a massive number of 3,989 companies came out with IPOs to raise an aggregate amount of Rs 27,174 crore. But, from ’03-04 to October ’06, only 151 companies raised Rs 35,741 crore from the Indian capital markets. Notably, these figures do not include the funds raised by follow-on public issues.
“Unlike the 90s, in the past few years the qualified institutional buyers have emerged as a major bulwark against scamsters and manipulators. Before an issue, it is the QIBs who decide the viability and then the price range acceptable to them,” said Prithvi Haldea, managing director of Praxis Consulting & Information Services, which runs Prime Database.
Increased surveillance by Sebi has also kept fly-by-night operators at bay during the current boom. Says Jayanth Varma, Dean of the Indian Institute of Management-Ahmedabad and a capital markets expert, “The public primary markets are now open to only big companies or those with a strong track record and a convincing story. The other mid-sized and small companies would have to go to private equity players and venture capital funds,” said Prof Varma.
After the recent scams, Sebi as well as the BSE and NSE have made the listing norms for new companies very stringent. “Today, it is the quality of the company coming out with an IPO which is of utmost importance. A good company, irrespective of its size can always raise money from the public,” said J Niranjan, head of investment banking at ICICI Securities.
During the four year-period from 1993-94 to 1996-97, a massive number of 3,989 companies came out with IPOs to raise an aggregate amount of Rs 27,174 crore. But, from ’03-04 to October ’06, only 151 companies raised Rs 35,741 crore from the Indian capital markets. Notably, these figures do not include the funds raised by follow-on public issues.
“Unlike the 90s, in the past few years the qualified institutional buyers have emerged as a major bulwark against scamsters and manipulators. Before an issue, it is the QIBs who decide the viability and then the price range acceptable to them,” said Prithvi Haldea, managing director of Praxis Consulting & Information Services, which runs Prime Database.
Increased surveillance by Sebi has also kept fly-by-night operators at bay during the current boom. Says Jayanth Varma, Dean of the Indian Institute of Management-Ahmedabad and a capital markets expert, “The public primary markets are now open to only big companies or those with a strong track record and a convincing story. The other mid-sized and small companies would have to go to private equity players and venture capital funds,” said Prof Varma.
After the recent scams, Sebi as well as the BSE and NSE have made the listing norms for new companies very stringent. “Today, it is the quality of the company coming out with an IPO which is of utmost importance. A good company, irrespective of its size can always raise money from the public,” said J Niranjan, head of investment banking at ICICI Securities.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
