See appetite for IPOs with good valuations: Prime Database

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Mahindra Holidays listed on the exchanges on July 16. It was the first high profile initial public offering (IPO) after Reliance Power, which happened way back in January 2008. Does this signal the return of appetite to the primary markets? Companies like Adani Power and Indiabulls Power would certainly hope so. The government too is likely to rollout IPOs for National Hydro Power Corporation Ltd (NHPC) and Oil India Ltd (OIL), those are the demarcated disinvestments lined up for the year in the next few months. So how much new paper can this market absorb?

Prithvi Haldea, MD, Prime Database, said this is a beginning of phase II where good companies with good valuations if they hit the market and if investor has appetite, they would be willing to look at those companies. Mahindra Holidays, he feels, is a good example of a company with a track record. "NHPC, OIL would also fall into this category, and if they come up with good valuations, there would be enough appetite."

Here is a verbatim transcript of the exclusive interview with Prithvi Haldea on CNBC-TV18. Also watch the accompanying video.

Q: What do you think of the likely prospects of all the other IPOs that are waiting on the sidelines? We have seen good or decent rather response to the Mahindra Holidays IPO and a pretty decent listing today?

A: There are distinctly three kinds of market conditions or three phases of the IPO market. One is where the issuer say that the investors are scared of the market, they don't want to look at any kind of offering, they don't want to look at the listed stocks and that is what we saw almost the whole of previous one and a half years.

The second phase is when the investors start looking back at the market and that is the time when only some good companies with good valuations are able to raise money.

The third phase is a frenzies phase, which is what we saw in 2006 and 2007 where everything sells. So we are now in the beginning of phase II where good companies with good valuations if they hit the market and if investor has appetite, they would be willing to look at those companies. Mahindra Holiday is a good example of a company with a track record, well-known promoters and willing to give a huge discount on its valuation that they have planned in 2008 and then finally when the book was built, they again did not go at the top of the bid price but they took a mid-price. So at this point of time, I think there is enough appetite for this kinds of issues.

NHPC, OIL would also fall into this category, there could be a couple of other companies, which have creditable track record and if they come up with good valuations, there would be enough appetite. The problem today is that the secondary market has been extremely volatile, the markets went up so rapidly after the elections and then we saw a huge decline, it is volatile then subsequently we saw a huge fall after the budget.

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