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India, other BRIC nations to lead global IPO markets recovery

Last Updated: Sunday, November 8, 2009 - 14:32

New Delhi: India along with other emerging BRIC markets such as China and Brazil are expected to lead the recovery in the global IPO markets by the end of this year, a survey by global consultancy firm Ernst & Young says.

According to the Ernst & Young `Institutional Investor IPO survey 2009`, a handful of Initial Public Offering (IPO) markets worldwide would show recovery by the end of 2009.
Of the over 300 institutional investors surveyed across the world, as much as 57 percent believe India and Brazil are the most likely to lead the recovery, in terms of new firms entering the local capital market, by the end of 2009.

Moreover, as much as 75 percent believe China IPO markets are likely to emerge from the economic downturn in the third or the fourth quarter of 2009, the report revealed.

While the US (31 percent) and Singapore (30 percent) were suggested as other possibilities for IPO market recovery.

"IPO activity in the last two quarters confirms that some markets are making an early recovery, notably in emerging economies of India, China and Brazil. A stable government and booming Sensex has led to the revival of IPO activity," Ernst & Young Partner and IPO Leader R Balachander said.
"There was pent up demand for capital and corporates were quick to realise that investors were looking for fresh avenues to deploy funds. All this augured well for capital markets and first signs of revival were visible in series of successful Qualified Institutional Placements (QIPs) and IPOs followed soon thereafter," Balachander added.

Further, 38 percent of the respondents in India felt that mid-cap companies would get into an IPO mode first with power, real estate, infrastructure and PSU disinvestment leading the pack.

However, globally investors believe that the technology sector would lead IPO recovery, followed by financial services and oil and gas sector, the Ernst and Young survey revealed.

"Investors are now looking for less risky investments, which mean they are more concerned with debt to equity ratios and invest in firms that perform well in the downturn and are able to service their interest and debt. When the market returns, investors will require a track record of significant growth," Balachander added.

For many developed markets like the UK, Australia and Germany (all 57 percent) and Canada (62 percent) investors believed domestic IPO markets would start to recover between first quarter of 2010 and second quarter of 2011.

Bureau Report

First Published: Sunday, November 8, 2009 - 14:32
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