Divestment key to IPO revival

WITH MARKETS PUTTING UP A SIZZLING SHOW, D-STREET IS FULL OF HOPE. BUT THERE ARE OTHER MACRO FACTORS THAT WILL KEEP THE SCORE CARD TICKING The rebound on Dalal Street could have a rub-off effect on the primary market. But a great deal hinges on govt's reforms agenda

THE Congress-led UPA coalition's return to power may have sparked a 'feel good' factor among fund-seeking companies and investors. But, according to merchant bankers, the near-term prospects
for the initial public offering (IPO) market will hinge on the trend in the secondary market and the government's policy on divestment of state-owned companies.
    There are plenty of firms including blue-chip PSUs, seeking to raise capital, but have not been successful over the past 12 months due to the downturn in the economy and resultant stock market plunge. According to Prime Database, hundreds of fund-seeking companies have put their IPO plans on hold amid a declining market since January last year.
    "As expected by the market, if the UPA government seriously implements the divestment programme, it would set the tone for the revival of the primary market. In fact, there are a few PSUs holding Sebi approval and ready to hit the market," said Prime Database MD Prithvi Haldea.
    Some merchant bankers are cautious on the prospects of the primary market. "It is too early to predict a revival in the primary market. The current market lacks depth and will take some time to stabilise. I think the actual recovery in the IPO market will be seen post-Diwali," said GS Ganesh, president, Collins Stewart Inga, a Mumbaibased merchant banker.
    IPO mobilisation has taken a big hit with the slide in stock prices since January last year. While there has been some recovery in the past few months, it, however, may not help boost sentiment towards the primary market, going by the trend. According to Prime Database statistics on initial and follow-on public offers, only one IPO hit the market in 2009 (till April), raising only Rs 24 crore. This was against Rs 16,927 crore (38 issues) and Rs 45,142 crore (106 issues) raised in 2008 and 2007, respectively. The market is now pinning hopes on the UPA government which, they feel, would keep the investor morale high by taking pro-reform measures, including divestment of PSUs.
    vijay.gurav@timesgroup.com 

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