Global IPOs raise $246bn in '06; India 8th biggest mkt

New Delhi, June 20, 2007: The rapid globalization of capital continues to propel global IPO markets forward with powerful momentum, says Globalization, the fourth annual Global IPO Report by Ernst & Young released here today.

Equity markets fuelled worldwide IPO activity in 2006 with the greatest amount of capital raised, a record US$246 billion raised through 1,729 deals. Greater China's IPO markets soared to an all-time high, with several mega""IPOs in 2006, and more large IPOs in 2007 US$56.6 billion in 1754 offerings.

The strength of India's economy, stock market, corporate profits, energy sector, and private equity have fuelled IPOs in 2006 and 2007 with India's markets raising US$7.23 billion, through 78 IPOs in 2006.

The report identifies key IPO trends of the last 18 months that reflect the effects of globalization: flourishing stock markets flooded in liquidity, vibrant growth in the emerging markets, escalating rivalry between the world's stock exchanges, the boom in large listings on local exchanges, and the proliferation of alternative financing options, especially private equity's emergence as a key player behind so many large IPOs.

In 2006, the global Top 20 IPOs raised about US $84 billion, representing 35% of the total capital raised by all IPOs. Membership in the Top 20 IPOs Club required a minimum of US$ 1.6 billion in capital raised. In keeping with the historical norm of companies listing at home, all 20 went public on domestic exchanges, except for 2 cross-border IPOs on the LSE from Russia and Kazakhstan. Among the Top 20, the dominant industries were energy/power/oil and financial services. Reliance Petroleum, India's largest IPO, featured at number seventeen in the World Top 20 IPOs raising US$1.8 billion.

India Key Trends

India's IPO market has been fairly broad-based in terms of transaction, although energy companies dominated with more than 50% share of funds raised. India's increasing number of larger deals has been driven by the growth of Indian corporations and their need for additional capital for potential acquisitions. In 2007 Indian IPOs continue to surge in numbers. Continued strength is expected in the real estate and energy sector.

"Keen investor interest in India's strong growth story has been reflected in the attractive valuations and key Price/Earnings multiples garnered by Indian companies. "The rapid growth in emerging market economies has resulted in a migration of capital from the developed economies into the emerging markets. The corporate sector is on a growth trajectory which has significantly increased their capital market needs. India's latest and strongest capital raising trends include localisation and qualified institutional placements" says R Balachander, IPO Leader, Strategic Growth Markets, Ernst & Young, India.

The localization trend in India is evidenced by the several billion-dollar IPOs hosted by Indian exchanges. In 2006, India's largest IPO, Reliance Petroleum raised US$1.8 billion, followed by the oil production and exploration company, Cairn Energy, which raised US$1.3 billion ""- with both companies listing on domestic exchanges only. However, some Indian companies are also listing abroad, especially London, Singapore and Luxembourg, primarily for higher valuations and visibility.

Enabling relatively easy access to global institutional capital, Qualified Institutional Placements (QIPs) have enjoyed immediate popularity. "QIP placements are a very big hit in India now. It's a two-way opportunity, for local businesses to gain access to global funds without having to list abroad and for foreign investors to invest in Indian companies. Some analysts believe QIPs are more efficient, cost & time effective, as also investor & issuer friendly in comparison to public offerings" added R. Balachander.

Cross-border activity and the role of foreign capital continue to grow. 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. 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.

Global Trends

As capital becomes more global, the vast majority of IPOs stay local, according to the report. Around the world, 90% of the world's companies choose their primary place of listing in the market where they operate. The growth of local liquidity and international investor interest has enabled even the largest of companies to list at home.

In 2006 the amount of capital raised worldwide by companies going public reached a record US$246 billion, up from US$167 billion the previous year. The number of listings was also up "" to 1729, the highest number in a calendar year since 2000.

China's companies raised the most capital. Raising US$56.6 billion in 1754 offerings, HKSE hosted the world's largest IPO ever, Industrial and Commercial Bank of China (ICBC), raising a record US$21.9 billion, the second largest offering of 2006 was Bank of China, which raised US$11 billion. Both IPOs dual-listed on HKSE and Shanghai. China was followed by US companies with total proceeds of US$34.1 billion, and Russia's companies with US$18 billion in funds raised.

The US launched the highest number of IPOs with 187 listings, followed by Japan with 185, and China with 175.

The trend of very active IPO markets has continued in the first quarter of 2007 with US$36 billion being raised in 372 IPOs worldwide, an increase on the same quarter of last year in terms of both capital and the number of listings.

Rise of World-class Financial Centres

Reflecting the rise of more world-class financial centers, HKSE, for the first time ever, led with 19% of total value (US$46.1 billion of global capital raised), bolstered by Chinese mega deals. LSE had 13.5% of total value, thanks to high numbers of cross-border issuers, and NYSE had 10%.

The number of world-class financial centers increases as local exchanges from around the world hosted many of the top 20 IPOs in 2006""including South Korea, Japan, Italy, Switzerland, India, Germany, Netherlands, and France.

The heated rivalry among the world's exchanges for cross-border listings that led to the NYSE Euronext merger is likely to drive more alliances and mergers among world exchanges in the near future.

IPO Activity in BRIC Countries

The emerging markets remain the wellspring of the world's most vibrant growth stories, with China fuelling Asian markets, and Russia driving European markets. Combined IPO activity in the BRIC (Brazil, Russia, India and China) countries increased to US$86 billion in 2006, up from US$29 billion in 2005, while the number of listings almost doubled to 279.

Wide-Array of Capital raising options

Private equity firms have become key players in the IPO and M&A markets and de-equitisations or so-called 'public-to-private' transactions are an emerging global trend. Cash-loaded private equity firms are scooping up well-established public companies and taking them private again. The value of companies taken private in 2006 was US$150 billion""a new record and almost triple the amount in 2004.

A trade sale through M&A is still viewed by many global companies as an appealing alternative to a traditional IPO. Last year, global M&A volume rose to an all-time high of US$3.8 trillion and the deal-making pace looks unlikely to slow down this year.

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