Archive for the ‘IPO’ Category

India Inc Set to Raise Rs.50k Crores Through IPOs in 2010

India Inc Set to Raise Rs.50k Crores Through IPOs in 2010.

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Domestic companies seems set to get on with the huge fund raising exercise this year with plans to raise over Rs 50,000 crore via public offers, driven by the sharp recovery in the stock market.

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Almost 50 companies have already filed the draft prospectus with the market regulator, the Securities and Exchange Board of India (SEBI).

This depicts at the healthy prospect of the strong IPO market after the encouraging revival of IPO market in 2009.

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Indian companies had raised about Rs 20,000 crore through IPOs in 2009.

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Market Experts feel that fund raising can go up to Rs 50,000 crore this year since Government has already planned to sell shares in a host of public sector companies by way of IPOs and follow-on public offers (FPOs).

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Five companies aiming to raise over Rs 300 crore have already received the regulator’s clearance for the IPO, if draft prospectus filed with the SEBI is anything to go by.

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“The IPO pipeline looks strong in 2010.

Also the way the government is pushing ahead with the disinvestment plan, fund raising can go up to Rs 50,000 crore by the end of the year,” SMC Capitals Equity Head Jagannadham Thunuguntla said.

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As part of its disinvestment plans the government intends to raise over Rs 20,000 crore by way of FPOs of NMDC, SAIL, NTPC, and REC.

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Some of the prominent private companies which have their IPOs lined up, beside this, include Jindal Power, BPTP, Reliance Infratel, Emaar MGF etc;

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“Of the total IPOs that are in the pipeline, as many as 16 are from real estate sector. However, their success is a bit doubtful as the appetite for realty IPOs are currently less,” Thunuguntla added.

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Primary market fund raising in 2008 saw 30 IPOs mopping up Rs 17,000 crore, but shares of many these companies gave the investors modest-to-good returns.

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Corporate India set to prefer QIPs for Funds Raising in 2010

Corporate India set to prefer QIPs for Funds Raising in 2010

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Merchant bankers are of view that Qualified institutional placements (QIPs) are expected to still be the preferred route to raise money in 2010.

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Earlier, QIPs  had gained traction during the middle of the year but ran into valuation headwinds in the last quarter of 2009.

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In 2009, Indian companies had raised close to Rs 33,000 crore by way of 45 QIP issuances.

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Also, about 33 QIP issuances are trading above the issue price, while 12 issuances are trading below the issue price.

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2009 was the year of the QIPs.

QIPs are expected to rule the roost, as there is serious interest and appetite in the overseas markets for instruments like converts/ADRs/GDRs.

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QIP, which was introduced in May 2006, picked up momentum in 2007 and then stagnated in 2008 when the market was in a bear grip.

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Delhi-based real estate company Unitech successfully raised $325 million through a QIP in mid-April 2009.

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Later, Indiabulls Real Estate and PTC India raised Rs 2,657 crore and Rs 500 crore, respectively, through such placements.

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QIP is a private placement by which a company sells its shares to qualified institutional buyers (QIBs) on a discretionary basis with the two-week average price being the floor.

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In a QIP, unlike an IPO or PE investment, the window is shorter (four weeks) and money can be raised quickly.

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According to a study by SMC Capital, the 45 QIP issuances have resulted into a mark-to-market (MTM) return of about more than 21.60 per cent, amounting to a profit of about Rs 7,050 crore.

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Some of the QIP issuances trading significantly above the issue price are Unitech (first round of QIP issuance), Emami, Shree Renuka Sugars, HCC , United Spirits, Dewan Housing, etc.

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Those trading below the issue price are Network 18 Fincap, REI Agro, Indiabulls Financial Services, Punj Lloyd, Delta Corp.

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“The overall positive listing performance of QIPs in 2009 will encourage investors as well as Indian corporates to access this route for fund-rising in an aggressive manner,” says Jagannadham Thunuguntla, equity head, SMC Capitals.

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QIPs had hit a pause button when a large percentage of them ran into valuation headwinds, resulting in companies raising a much smaller amount than what was initially proposed.

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🙂

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FLASHBACK 2009


For India, 2009, been a great year with the return of a stable government at centre, good FII inflow, 80% increase in the Indian stock market and less terror attacks. But globally, H1N1 influenza and a series of bankruptcy by some big international giants are some events, which we never want to happen again.

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Putting behind the worst annual performance ever, Indian equities were on a roll in 2009, catapulting a key index by more than 80 percent, to close the year with one of the best gains among emerging markets.

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At closing bell Thursday, the 30-share benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) was ruling at 17,464.81 points with an impressive gain of 7,817.5 points, or 81.03 percent, over the previous year’s close at 9,647.31 points.

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This was the best annual performance since 1999 and was in sharp contrast to 2008, when the Sensex ended with a hefty loss of 10,639.68 points or 52.45 percent making it the third-worst performing equities index among emerging markets.

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The story was no different at the National Stock Exchange (NSE), the other major bourse in the country, where the broader 50-scrip S&P CNX Nifty gained a hefty 2,241.9 points or 75.76 percent when it closed at 5,201.05 points Thursday.

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The main factors that made key indices rise like a Phoenix was resilience of the Indian economy and impressive growth despite global slowdown that also reflected in corporate earnings and the return of the foreign institutional funds.

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According to markets watchdog, the Securities and Exchange Board of India, such overseas funds pumped about $17.46 billion into the Indian stock markets in 2009, as opposed to a net sale worth $13.135 billion for the first time in over a decade..

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‘The performance in 2009 surpassed the expectations of even the most optimistic person. There were not many places left for foreign funds to invest and India was among the few attractive destinations,’ said Jagannadham Thunuguntla, equity head at SMC Capitals.

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Even as the Sensex gained 7,817.5 points, some of the 13 sector-specific indices stood out because of their performance — the metals index appreciated the most, up 233.68 percent, while auto followed with a gain of 204.16 points..

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Similarly, the indices for information technology was up 132.78 percent, capital goods gained 104.26 percent, consumer durables rose 97.8 percent, banking gained 83.9 percent, state-run enterprises inflated 80.54 percent, power moved up by 74.3 percent.

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On the whole, the year started on a promising note with the government unveiling a second dose of fiscal stimulus to help the economy weather the adverse impact of a slowdown in the global economy — touted as the worst in eight decades.

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As a result, the Sensex rallied till Jan 6 and gained 7.13 percent in just three days of trading. But then came the confession of a multi-million dollar fraud by Satyam Computer founder B. Ramalinga Raju, triggering a 7.25 percent fall in just one session.

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Till February, the barometer index was oscillating between 9,000-odd points and 10,300-levels. But as signs of a prolonged economic recession receded the world over, Indian equities found more takers and reflected in steady rise in the index.

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By the beginning of May it was trading comfortably around the 12,000-point mark and gave a thumping welcome to the electoral victory of the Congress party-led United Progressive Alliance — that even saw suspension of trading as indices hit the upper circuit twice.

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On that eventful day of May 18, the Sensex stood at 14,284.21 points, gaining 2,110.79 points, or 17.33 percent, over the previous close, while Nifty also rose 17.3 percent, or 636.4 points, to close at 4,308.05 points.

The remaining months of the year saw a steady rise in the index with interim corrections even as events like the presentation of an industry-friendly national budget and a high growth for the economy during the second quarter boosted investor sentiments.

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Looking at individual stocks that go into the Sensex basket, the top five gainers during 2009 were Tata Motors, up 398.33 percent at Rs.792.60; Mahindra and Mahindra, up 293.23 percent at Rs.1,080.80; Sterlite Industries, up 230.45 percent at Rs.861.65; Hindalco, up 211.23 percent at Rs.160.75; and Maruti Suzuki, up 199.88 percent at Rs.1,559.65.

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Only three stocks ended lower — Bharti Airtel was down 54.02 percent at Rs.328.80; Reliance Communications was down 23.92 percent at Rs.172.90; and Reliance Industries which ended lower since the company declared a 1:1 bonus.

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Looking ahead, the markets expect some more action once the government’s divestment programme gets underway even as investors have their fingers crossed on when the Sensex will breach the magical 21,000 mark.

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So, overall, the year 2009 has been one of the most significant chapters in the stock market growth with an increase of 80% in its value. Further, we keep our spirits high on FM’s comment that Indian economy can grow at 7.75% in FY10.

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FII investment, this year, is the highest ever inflow in India

FDI inflow India Last year Touched 80 Thousand crores

The FII investment of Rs 80,500 crore in 2009 is the highest ever inflow in the country in rupee terms in a single year and comes a year after they pulled out over Rs 50,000 crore.

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FII inflow so far this year has broken the previous high of Rs 71,486 crore parked by foreign fund houses in domestic equities in 2007.

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Market analysts believe that the FII inflow in India may continue in the next year as well, if the liquidity conditions remain strong.

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As per Market experts, FIIs are expected to continue to be positive on domestic markets and in general Indian markets seems to fare well in 2010.

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Delhi-based SMC Capitals Ltd’s Equity Head Jagannadham Thunuguntla has supported the view, saying,

“If liquidity conditions remain strong next year, one can expect FII inflow to remain strong into India even in 2010 as well.”

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The Bombay Stock Exchange’s benchmark sensex, comprising 30 bluechip stocks, has gained more than 70% so far in 2009, one of the best performers among leading global bourses.

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“However, if dollar-carrytrade-unwinding starts, then one can expect rush of FII outflow from the country, resulting in pressure on Indian markets,” he cautioned.

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Significantly, last year the FIIs had pulled out a net Rs 52,900 crore from the domestic bourses — a trend triggered with the collapse of global financial services icon Lehman Brothers in the middle of September 2008.

This selling trend continued till the first two months of the passing year.

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India’s Stocks Rose to Highest since May 2008

India’s stocks rose to their highest in 19 months

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India’s stocks rose to their highest in 19 months after foreign direct investment into the nation jumped 61 percent

and the government relaxed a rule to make some state-run companies globally competitive.

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Tata Motors Ltd., soared to the highest in more than two years after foreign direct investment into the nation rose to $1.74 billion in November.

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Oil & Natural Gas Corp., the largest state-owned oil explorer, climbed the most in three weeks as the government increased the cap on the amount some state-run companies can spend to acquire assets and set up joint ventures.

“Money always chases opportunity and now the opportunity is in India,” said

Jagannadham Thunuguntla, chief strategist at SMC Capitals Ltd. in New Delhi.

“There are not many options left for the global investor.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 129.50, or 0.8 percent, to 17,360.61, the highest since May 16, 2008.

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The gauge has risen 3.8 percent this week, the most in more than a month.

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The Sensex climbed 80 percent this year, set for its best annual performance in 18 years as economic expansion accelerated and the election victory of Prime Minister Manmohan Singh ruling coalition in May raised optimism he will push through reform measures to boost growth.

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The S&P CNX Nifty Index on the National Stock Exchange rose 0.7 percent to 5,178.40.

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The BSE 200 Index increased 0.7 percent to 2,169.65.

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Mid-cap and Small-cap Shares Outperformed Blue Chips in 2009

mid-cap and small-cap shares outperformed blue chips

2009 was a year when stock market minnows beat the big boys of Dalal Street.

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🙂

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This year, mid-cap and small-cap shares outperformed blue chips, setting the momentum for 2010.

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Stocks of companies with medium and small market capitalisations shot up more significantly than the scrips with larger valuations.

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This was all happening when stock market  was witnessing a recovery across the board in the year.

Market experts said the smaller capitalization stocks do not need huge amounts of investments to rally and so managed to outperform their peers in the benchmark index, Sensex in the year.

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According to an analysis of the performance of mid-cap and small cap indices on the Bombay Stock Exchange, the small-cap index has given a return of as much as 115 per cent, while the mid-cap index has gained nearly 100 per cent so far in 2009.

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In comparison to the performance of its smaller peers, the 30-share benchmark index, Sensex, gave a return of 75.3 per cent to investors.

“The rally in the mid-cap and small-cap have been stronger than that of the large cap index of Sensex.

Mid-cap and small-cap indices comprise stocks require relatively smaller investment as they are available at cheap rates in the market,”

SMC Capitals Ltd Equity Head Jagannadham Thunuguntla said.

The mid-cap and small cap indices track the performance of companies with market capitalisations that are a fifth or tenth of that of blue chip firms.

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Retail Investors Turn Cautious Towards IPOs

Retail Investors Turn Cautious Towards IPOs

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Aggressive IPO pricing and poor post-listing performances have made retail investors extremely cautious this year.

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Of the Rs 18,407 crore collected through IPOs, the retail investor portion was subscribed 1.86 times on an average, according to a research report by SMC Capital.

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Qualified institutional buyers‘ portion was subscribed by 11.42 times and high net worth individuals’ portion by 8.49 times.

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IPOs this year were subscribed 7.64 times.

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Of the 19 IPOs, the retail portions of five issues were not even fully subscribed, while five just about managed to get subscribed.

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Many retail Investors have decided against putting money into recent IPOs after looking at the post-listing performances of stocks that were listed earlier.

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Only shares of six companies are trading above their issue prices – these include Mahindra Holidays, Oil India and Cox and Kings (India).

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A lot of investors had saved up, especially for the NHPC IPO.  But when it listed poorly these investor must have suffered hugely.

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As per the market experts , a lot of the IPOs that came out this year have been highly priced, which has made the already skeptical retail investor stay away from the primary market.

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Bunch of retail investors are looking at “short-term gains”, so they now prefer to invest their money in the secondary markets rather than in IPOs, market experts feel.

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If one goes by the DRHPs filed with SEBI, there are approximately Rs 29,000 crore worth of IPOs in the pipeline, said Mr Jagannadham Thunuguntla, Equity Head at SMC Capital.

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🙂