With one IPO in Sept, India still beats US

Wilting under the global financial crisis, the Indian IPO market saw just one initial public offer (IPO) making the mark last month. However, it was still a better performance than a complete drain-out in the US. This is the first time in the past six years when the world’s largest economy and capital market did not see a single IPO in September.

In the Indian primary market, white mineral manufacturer 20 Microns was the only company that dared to float its IPO in September, even as the global crisis continued to take its toll on the local bourses as well.

Interestingly, the issue, though small, received good response from investors by getting subscribed over four times. The issue price has been fixed at Rs 55 a share at the upper end of the price band.

Experts believe the primary market is witnessing a lull because of the bearish conditions in the secondary market, which is dissuading firms to enter the capital market amid the current financial situation.

“Certainly the primary market is seeing a lull as it is becoming more difficult for companies to raise money in recent times. Given the current uncertainty and volatility, we expect that companies that plan to raise large amount of money have to wait for some more time till sanity returns to the markets,” Religare Securities President Amitabh Chakraborty said.

“The situation looks pathetic .... Easy money is no more available for companies as liquidity has dried up and premium valuations for public issues are now a thing of the past,” said Paras Bothra, research head, Ashika Stock Brokers.

In the US, it is only the second time after 2001 when there has not been a single IPO during September, according to data compiled by global consultancy Dealogic. Interestingly, so far this year, the US has seen the highest volume ever of IPOs that were withdrawn or postponed. The volume of withdrawn or postponed IPOs from US issuers aggregated to $13.1 billion via 71 deals till August in 2008, according to the Dealogic data.

The global IPO volume witnessed a 49 per cent drop to $97.2 billion in the first eight months this year from $188.8 billion in the same period in 2007, the Dealogic report said.

Even the number of deals has fallen to 633 till August 2008 from as many as 1,255 deals in the same period in 2007.

The largest US IPO withdrawn or postponed this year was of EXCO Partners, which was planning to enter the market with a $1.7-billion IPO and Tommy Hilfiger’s $750-million IPO.

“Primary markets do well in good times. In fact, the IPO activity is at its peak at the top of the bull cycle. Now that markets are on the downturn, the IPO activity is not likely to pick up. We will have to wait for the next bull run,” said P K Agarwal, president, research, Bonanza Portfolio.

Gaurav Dua, head, research, Sharekhan, believes the primary market will continue to be subdued following the bearish sentiment in the secondary market, which is likely to be under pressure for the coming six to nine months.