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8 | ifr special report | September 2009 EQUITIES “


Equities resurgent as CBs slumber


Indian ECM has a spring in its step in 2009 after a sombre 2008. Since the May 2009 election results declared the Congress Party and allies clear winners, an avalanche of qualified institutional placements have hit the market, particularly in the real estate and infrastructure sectors.


Investors are becoming


discerning but are still willing to provide capital at the right price. There will be pockets and windows of opportunity. Many IPOs are getting lined up and there are a lot of unexecuted QIPs out there. The government is likely to embark on more aggressive disinvestment in second half of the financial year and that will drive issuance.





he Bombay Sensex has skyrocketed almost 51% this year, making it one of the world’s best performing markets. While the market hit a slight wobble on July 6, declining 5.8%, the day the Indian budget was released, equity deals have poured out of India and every issuer and banker is looking to make hay while the sun shines.


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According to Thomson Reuters’ data, US$8.8bn in equity issuance has been raised so far this year with most of it printing in the past three months. “A phenomenal amount of capital has been raised through GDRs and QIPs since the market opened up three months back. A lot of that money has gone towards de- leveraging, including much of the real estate paper that was raised,” said Ravi Kapoor, head of capital markets origination at Citigroup. “Investors are becoming discerning but are still willing to provide capital at the right price. There will be pockets and windows of opportunity. A lot of IPOs are getting lined up and there are a lot of unexecuted QIPs out there. The government is likely to embark on more aggressive disinvestment in second half of the financial year and that will drive issuance,” he said. Although most of the money raised so far has been through QIPs, there are signs that issuers are now shifting towards the IPO markets, which reopened with Adani Power’s Rs30.2bn (US$625.8m) IPO. The deal, which closed on July 31, was the first major IPO since Reliance Power’s IPO in 2008. Although the stock made a rather lacklustre debut on August 20, the deal provided momentum to the markets and on the back of that, National Hydroelectric


Power Corp’s (NHPC) US$1.25bn float saw strong demand.


NHPC was the first government divestment to hit the market in a long time and was a resounding success. When books closed on August 12, the deal was 23.5 times oversubscribed with the institutional book covered 30 times and the high-net-worth individual portion 57 times subscribed.


NHPC’s success augurs well for the growing pipeline of state-run companies looking to tap the market, including Oil India’s US$500m–$600m float, set to launch in September. However, there are indications that the government is getting choosier about valuations following Adani Power’s IPO success. Generally speaking, however, government divestments are expected to be sensibly priced and well- received by investors.


“There is appetite for reasonably priced Indian paper, especially the likes of NHPC because overall the direction of the market is positive, with growth in the economy, as demonstrated by corporate earnings in Q1. There is a fair bit of investor bias towards India among various economies given the positive momentum in the economy,” said Dilip Kadambi, head of ECM at RBS, India. Although, the finance minister released few details on government divestments during the budget, there has been growing noise about state-run companies like NMDC, Rural Electrification Corp and Power Grid looking to tap the market, though the exact format – whether through a follow-on public offer or QIP has not yet been determined. The finance minister has proposed increasing the amount of state- owned companies that can be listed to 25%. Looking forward, equity issuance is likely to be driven by a mixture of QIPs


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