UBS sees quarter of India share sales pushed to 2012

UBS AG, the fourth-biggest arranger of Indian share sales in 2010, said at least a quarter of its offerings scheduled for this year will be pushed to 2012 after equities slumped. UBS was involved in share-sale transactions worth $7 billion in India last year and sees a “significant drop” in equity fund raising in 2011, Purvesh Shah, head of global capital markets at UBS Securities India Pvt, said in a May 24 interview.

UBS has not advised on any stock sales completed in India this year, he said, declining to comment on how many deals UBS is working on. “It’s a complete swing in terms of the sentiment,” Shah said at his office in Mumbai. “We have moved from being optimistic during the end of last year to very highly risk averse now.”

Stock sales are expected to slow in a market where the Bombay Stock Exchange Sensitive Index has slumped 11 per cent this year on concern higher borrowing costs will hurt economic growth. India’s economy rose 7.8 per cent in the three months ended March 31 from a year earlier, slowing from an 8.3 per cent gain in the previous quarter, the government said in a report on Tuesday. The median of 22 predictions in a Bloomberg News survey was for an 8.1 per cent advance.

Indian companies raised Rs 24,500 crore ($5.4 billion) through domestic stock sales this year, down from Rs 47,200 crore in the first five months of 2010, data compiled by Bloomberg show. US companies raised $107 billion this year, up from $54 billion in January-May 2010. The Asia-Pacific region has had $89 billion of equity offerings this year, compared with $104 billion in the first five months of 2010.

‘LOSE PATIENCE’
A delay in government decision-making is also causing some companies to put off their stock sales, Shah said. Finance Minister Pranab Mukherjee appealed to business leaders for help in generating support on some legal amendments, The Times of India newspaper reported on March 2. The government did not have the numbers to pass legislation in the Rajya Sabha, the upper house of the country’s parliament, the newspaper cited Mukherjee as saying.

“Overseas investors are starting to lose patience,” Shah said. “Along with macro concerns like inflation, we are grappling with a relatively weaker track record on reforming certain sectors. It has reached a point where good quality companies are finding it difficult to get trades done.” Stocks have slumped as India’s central bank raised interest rates nine times since March 2010 to curb rising prices. Wholesale-price inflation quickened to 8.98 per cent in March, beating the central bank’s 8 per cent target. Inflation will stay “elevated” until September, Governor Duvvuri Subbarao said on May 3, the day of the last rate increase.