'India to lead IPO recovery by year-end'

India could be among the first markets to see a recovery in the initial public offer (IPO) space, according to a survey by Ernst & Young (E&Y), a global financial advisor. The survey’s findings point out that recovery is expected by the end of 2009 in emerging markets which include China and Brazil.

The survey was based on the responses from over 300 institutional investors across the world. Out of them, 57 per cent of the respondents highlighted that India will show recovery in IPO markets. About 75 per cent respondents backed China, whereas Brazil emerged at par with India with the same percentage of respondents betting for it.

Around 38 per cent of the respondents in India, according to the survey, felt that mid-cap companies will make the first move. And, companies in sectors such as power, real estate, infrastructure and PSU disinvestment, in particular, will lead the recovery.

However, on the global front, investors are bullish on technology sector to lead IPO recovery followed by sectors such as financial services and oil & gas.

In the first two quarters of the current financial year, the Indian market already has seen an early recovery with around a dozen IPOs. Though successful in terms of subscriptions, there was no frenzied response from retail investors as was witnessed back in 2007 and early 2008.

Moreover, a series of qualified institutional placements (QIPs) were also among the first signals of recovery in the capital markets here.

“A stable government and the booming Sensex has lead to the revival of IPO activity. There was a pent-up demand for capital and Indian corporates were quick to realise that investors were looking for fresh avenues to deploy funds, said R Balachander, partner and IPO leader at Ernst & Young. Going forward, companies needed to be less aggressive on pricing and should consider leaving a little more on the table for investors, he added.

The survey revealed investors were looking for less risky investments as factor of debt-to-equity was the top priority influencing the IPO investment decision-making process. Interestingly, in the last year’s institutional investor survey, debt-to-equity was the 9th most important financial factor.

Among the developed markets, investors bid for the US (31 per cent) and Singapore (30 per cent). For other developed markets including the UK, Australia, Germany and Canada, investors believed that respective domestic markets would start to recover between Q1 2010 and Q2 2011. Whereas, for markets such as France and Japan, investors felt that recovery could be more than 18 months away.