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Indian primary markets are shrugging off all sorts of fears and inhibitions as a number of companies including some industry leaders gear up to raise Rs. 30,000 crore through IPOs. Will the IPO boom this time around be any different from the ones that have hit the Indian primary markets in the past?
The trends in the primary market in the current fiscal have so far been highly encouraging, as different sections of the financial community are inclined to extend liberal assistance to worthwhile projects. Keeping in mind the recent spate of interest in the primary markets, one is forced to think whether there is really such a thing as a vacation in the IPO market? Infrequent as they may be, they have historically been the rest periods between frenetic levels of activity when the weekly calendars overflowed with offerings. Indian IPO markets have enjoyed brief periods of sunshine on and off, for example in 1994-95 (financial sector IPOs), or 1999-2000 (IT boom) and the latest is being heralded with -I-flex, Punjab National Bank and Bharti Televentures raising nearly Rs. 1,200 crore from the Indian primary markets.
More than 1,000 IPOs were floated in the Indian market during financial years 1994 and 1995, however the number fell to fewer than 100 annually from the financial year 1997 on. There was a brief revival at the height of the dotcom boom in 1999-2000, but the disappearing act of many of the IPO issues that flooded the market at that point of time gave rise to greater investor suspicion. Mobilization in 2001 was a dismal Rs. 392 crore, which is moderately higher than Rs. 314 crore which were mopped up in 1995. As per the statistics of PRIME Database (PRIME Database has information dedicated to capital markets, its headquarter is in New Delhi), 2001 witnessed a significant decline of about 82 percent over the
Rs. 2,165 crore mobilized in 2000. In the last year only 15 companies tapped the capital markets. However, 2002 might end up with a different story altogether. According to Prithvi Haldea, Managing Director, PRIME Database, "A new paradigm is now required. Our regulations are enacted or amended very frequently, supposedly to serve the investors' concerns. In reality, these mainly help the issuers, intermediaries and the operators. We seem to have forgotten that the main role of the capital market is to provide capital."
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