NEW DELHI - With big-ticket initial public
offerings (IPOs), the stock markets have emerged
as a key route for India Inc to access capital.
This month, mega-issues of real-estate developer
DLF Ltd and ICICI Bank, India's largest private
lender, were oversubscribed.
ICICI Bank
said this Tuesday that its offer to raise as much
as US$4.3 billion, India's largest share sale, was
more than fully subscribed on the local portion
within hours of its opening. The
bank
plans to raise up to $2.15 billion within India
and an equal amount through American Depositary
Receipts.
This month, New Delhi-based DLF,
controlled by billionaire Kushal Pal Singh, raised
Rs91.9 billion ($2.24 billion) when it sold 175
million shares at Rs525 apiece, the middle of the
range offered to investors, the company said.
Analysts said the main reason for the
primary market's good performance was the largely
buoyant secondary market. The economic resurgence
and the stable political climate also helped the
scenario, they said. Federal Finance Minister P
Chidambaram recently said the Indian economy
should grow at 10% in the current fiscal year,
following on 9.4% in the last fiscal year and 9%
in 2005-06.
India's economy, stock market,
corporate profits, energy sector, and record flows
of private equity have fueled the IPO issues in
2006 and 2007, a recent Ernst and Young (E&Y)
report says.
According to the report,
Indian companies raised $7.23 billion from the
domestic capital markets in 2006, making the
country the eighth-largest issuer of equity
capital in the world.
In contrast, Chinese
companies raised a huge $56.6 billion, the highest
amount in 2006. US companies followed with $34.1
billion and Russian companies with $18 billion.
Worldwide, IPO activity in 2006 raised total
capital of $246 billion.
Of the total
funds raised in India, energy companies garnered
half the funds. Mukesh Ambani's Reliance
Petroleum's $1.8 billion issue ranked 17th in the
top 20 IPOs in the world, E&Y said, expecting
sustained strength in the real estate and energy
sectors. Cairn Energy raised US$1.3 billion.
But, this does not mean that only energy
firms will dominate, the report said. India Inc
mobilized the highest ever, Rs250 billion via
equity offerings, IPOs and follow-on issues, in
fiscal 2006-07, according to Prime, a database in
the primary capital market. The mobilization is 5%
higher than the preceding year. Other studies also
point to a strong reliance on equity markets,
while retail investors remain bullish.
Courtesy of a strong and rising rupee, the
combined wealth of Indian investors in the
benchmark Bombay Stock Exchange (BSE) index,
Sensex, crossed the trillion-dollar mark for the
first time in May. Even as the rupee hit a new
nine-year high against the US dollar, at 40.50, a
strong BSE upswing catapulted market
capitalization over the $1 trillion mark.
"This represents a sharp gain of 60% in
the combined market cap of all the BSE-listed
firms from $625 billion a year ago," the exchange
said in a statement. The country's 30 top
blue-chip firms, which make the Sensex,
contributed about 47% of the total market cap.
Figures released by the Association of
Mutual Funds in India show that in the month of
April 2007, the collective assets under management
of India's mutual-funds industry soared to a
record high, breaching the Rs3.5 trillion level
for the first time.
Recently, Anil
Dhirubhai Ambani Group firm Reliance Mutual Fund
cemented its position as the country's largest
fund house with its assets crossing the Rs500
billion level. ICICI Prudential Mutual Fund has
maintained its second position, while UTI Mutual
Fund is at the third slot.
Another recent
study has said the growth of the Indian
mutual-fund industry is among the fastest, though
there is still some way to go. But given India's
short history as an emerging global economy, the
figures are still impressive.
According to
the 2007 Investment Company Fact Book,
released by Investment Company Institute, the
Indian mutual-fund industry's growth at 43.6% made
it as the world's eight-fastest, though it is much
below Russia (134%), but above Brazil (38.2%).
Indian companies are also listing abroad,
especially London, Singapore and Luxembourg,
primarily for higher valuations and visibility,
the E&Y report noted. Cross-border activity
and the role of foreign capital continue to grow
and foreign institutional investors make up
three-fourths of new capital flowing into the
market. The private-equity rush into India is
creating the potential for many IPO exits.
Meanwhile, Reliance Industries Ltd,
India's most valued firm with a market cap of more
than $50 billion, has also become the first
private entity to cross the Rs1 trillion ($25
billion) revenue mark
In the face of an
appreciating rupee, the Indian economy crossed the
trillion-dollar mark in April, making it the 12th
country to achieve the milestone. As recently as
2000-01, India's gross domestic product was less
than $500 billion, which means it is more than
twice the size six years on, because of consistent
8-9% growth.
Conservative estimates by
Indian analysts have pegged mergers and
acquisitions (M&As), including outbound and
inbound deals involving Indian firms, to scale
$100 billion in 2007 as against $50 billion in
2006 and half of that in 2005.
Leading
financial consultancy Thomson Financial has said
that 2006 was a mega-merger year for India. This
year, India has already seen M&As worth more
than $40 billion, including the outbound
Tata-Corus, Hindalco-Novelis, and Suzlon-RE Power,
besides Vodafone's acquisition of a majority in
Hutchison Essar Ltd for more than $18 billion.
The Organization for Economic Cooperation
and Development in its "Employment Outlook 2007"
report released this week said that India, the
world's second-fastest-growing economy after
China, generated more than 11.3 million new jobs
every year during 2000 and 2005, higher than
Brazil (2.7 million), Russia (700,000) and China
(7 million). This bloc of four fast-developing
countries is referred to by economists as BRIC
(Brazil, Russia, India and China).
In
2006, private-equity firms invested more than $7
billion in India. Top global private-equity funds
as well as local funds have been key drivers of
Indian IPO markets, said R Balachander, an E&Y
analyst for India IPOs.
Emerging markets
were the flavor, with the four BRIC countries
seeing combined IPO activity to the tune of $86
billion in 2006, up from $29 billion in 2005,
while the number of listings almost doubled,
E&Y said.
Siddharth
Srivastava is a New Delhi-based
journalist.
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