$15 bn worth new issues to hit mkt

Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Over USD10 billion of new issues are hitting the market over the next three to four months. CNBC TV-18 reports how retail and high net worth investors might be the party poopers in the Dalal Street's mega issue!

 

It may all seem quiet on the surface but there is a flurry of activity on the anvil, especially in the new issues market. At last count, 150 companies were expected to raise USD 10 billion in 2007. But this number has now risen to over USD 15 billion! 

 

And in the pipe line are two mega issues - that of ICICI Bank and DLF worth USD 7 billion and other issues of about USD 6 billion.

 

Some would call it a liquidity crunch in the offing. But there are those who spot opportunities in adversities.

 

Jaiprakash Sinha, Ambit Capital, "The ICICI Bank issue will have 75% of overseas issue; that way the domestic component will be only Rs 5,000 crore. In the case of DLF also a lot of chunk will come from FIIs - clearly these two issues can clearly be absorbed."

 

The FIIs are taken care of, but the real challenge is getting high net worth and retail investors since 40-50% of all IPOs are reserved for these two segments. That amounts to almost USD6-7 billion of the forthcoming issues.

 

Prithvi Haldea, Managing Director, Prime Database, "We Can raise easily Rs 30,000-40,000 crore from retail. It is not right to doubt the liquidity of the retail investors because we have not even touched the surface. There is so much of liquidity available, all that is required is good quality paper at a price the retail thinks or gets validated as a good quality IPO, money will flow."

 

But the rising cost of that money may be the dampener. In the past six months, interest rates for borrowing to invest in IPOs have risen by over 3% to a total 13% per annum. Reason enough for many to believe that the response from this category of investors could be a mild one.