Attracted by improving investor sentiments in the stock market, companies are warming up to the idea of raising funds through initial public offers and a number of companies have firmed up their IPO plans to hit the market.
New Delhi: Attracted by improving investor sentiments in the stock market, companies are warming up to the idea of raising funds through initial public offers and a number of companies have firmed up their IPO plans to hit the market.
At least five companies have already filed their draft offer documents for IPOs with the market regulator Sebi in the past couple of months, while a similar number of companies, including retail chain operator Spencer's, satellite TV broadcast services arm of Videocon and Tata Sky are also said to be looking to tap the IPO market.
Experts say that the sentiments have improved after various reform measures announced by the government and the market regulator in the recent weeks, while an uptrend in the secondary market is also helping bringing companies to the market.
The companies having filed their draft offer documents since September include Calyx Chemicals and Pharmaceuticals, Madhya Bharat Agro Products, SMC Global Securities, Bharti Infratel and G B Tools and Forgings.
Besides, RP-Sanjiv Goenka Group CESC said it will list Spencer's by next year and the satellite TV broadcast services arm of Videocon Group's Videocon D2H and Tata Group's Tata Sky are also reportedly planning to hit the capital market in the near future.
Most of the companies plan to utilise their proposed IPO proceeds for capacity expansion as well as working capital requirements.
Sebi Chief U K Sinha recently said that the regulator is noticing a renewed optimism about the economy and about the market.
Admitting that IPO market has been very sluggish so far this year, Sinha said that a renewed interest was being noticed for past few weeks, giving an impression that people are optimistic and they are going to make investments.
"The current market conditions has turned favourable for companies planning to come out with their IPOs mainly on account of various initiatives taken by the government," Sudip Bandhopadhyay MD and CEO at Destimoney Securities said.
"Besides, festive season is also approaching so I expect many companies that withdrew their IPO and companies that have not hit the capital market despite getting Sebi's approval on subdued market conditions would definitely plan to go ahead with their public issues," he said.
In the last two months, broader market Sensex gained 1,125 points or more than six percent as Foreign Institutional Investors (FIIs) invested a hefty sum of about Rs 30,000 crore on the back of a slew of reforms initiated by the government.
According to market analysts, several tough economic decisions, including opening up FDI in retail and aviation sectors, capping up of cooking gas subsidy and hike diesel prices, taken by the government recently have boosted the secondary market, which would eventually help companies to launch their IPOs.
"Any company which was planning for the IPO in the last two-three years can hit the market as it is any excellent time for the IPO," Wellindia President (Research) Vivek Negi said.
He further said the success of any IPO depends on the sound fundamentals and pricing issue.
Sebi has already floated a discussion paper on 'mandatory safety net mechanism' in IPOs, a move that would help in fair-pricing of the public offers and would provide capital guarantee on a certain portion of investments.
Besides, the regulator has also announced various other IPO market reforms, steps for enhanced distribution network, incentives for brokers, bidding through electronic IPO platforms and allotment of a minimum lot of shares.
These steps are likely to help in creating a greater appetite for IPOs in the near future, provided the market conditions remain conducive and there are no adverse global developments that might affect the domestic investor sentiments.
Besides, as many as five firms -- Rashtriya Ispat Nigam Ltd (RINL), Goodwill Hospital and Research Centre, Fast Train Cargo, Ace Tours Worldwide and C Mahendra Infojewels -- had filed their respective IPO documents during April-May period with the Sebi, but none of them hit the capital market on lacklustre market conditions.
While two companies packaging materials maker Plastene India and auto parts manufacturer Samvardhana Motherson Finance shelved their IPO plans in May citing poor response from investors amid weak broader market.