IPO party to continue, $30bn to be raised this fiscal

Excerpts from India Business Hour on CNBC-TV18 Watch the full show » Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

The party in the primary market is far from over. USD 15 billion have already been raised so far, and this number is all set to double before the year ends. CNBC-TV18's Priyal Guliani reports.

USD 30 billion -- that's the amount that companies will have raised from the primary markets by the end of this financial year. Half this amount has already been raked in, through various exercises, including IPOs, QIPs, and GDR issues.

Ravi Kapoor, MD and Head-Equities, Citigroup said, "It will be an amalgamation of QIPs, IPOs, convertible bonds and disinvestment. So I think, all put together, to my mind could be anywhere close to USD 12-15 billion by the time we wind up this financial year. That will be USD 30 billion plus in one financial year."

However, there are fears that higher valuations may keep investors at bay.

Kapoor further said, "I would imagine investors having bought the stock a lower levels where the valuations were looking very attractive to a level now where the valuations are looking 19 times on a Sensex and Nifty on a forward basis, I think investors will be a little discerning."

But others say demand for such instruments is sustainable, if investors see potential.

Tarun Kataria, Chairman, HSBC Sec and Capital Markets said, "I don't see a material issue there digesting it. But then again I come back to the fact that it has to be a quality co, priced correctly, good management team and good story. Those will do well."

A flurry of fund-raising activity in the real estate sector is also fuelling the fire. Companies have laid the groundwork to raise nearly USD 3 billion in the last two days alone, and more are on the anvil and this time bankers expect some sanity in terms of valuations.

Atul Mehra, MD and Co-CEO, JM Financial said, "It is an interesting sector, this is a sector that is under invested and as a result of which this is a sector that has outperformed by a huge margin in the last 6 months. I think if the companies are well positioned and the story is well explained, and they come out at an attractive valuation, there is no shortage of money for these companies."

So it's USD 15 billion down, and USD 15 billion more to go and bankers can get ready for some sleepless nights over the next 6 months.