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Wednesday, May 23, 2007

IPOs to break all records in June-ICICI

Come June, the domestic primary market may witness the highest ever capital mobilisation.

Although the exact size and date of the initial public offering (IPO) of DLF and the follow-on issue of ICICI Bank are yet to be announced, marketmen expect these offers will compete head to head for investors’ fund of over Rs 24,000 crore next month.

In that case, the total capital collection from the primary market will exceed the March 2004 level, when five companies mobilised nearly Rs 11,403 crore.

Real estate major DLF, which took four months to receive market regulator Sebi’s clearance for its public issue, is expected to hit the market by the end of June with an over Rs 13,000 crore issue.

However, marketmen expect that the public issue could be of around Rs 11,000 crore, and the remaining part might be raised from private equity investors.

The country’s second largest bank, ICICI Bank, has sought approval from Sebi to sell Rs 17,500 crore of shares to local and overseas investors. The bank has set a target of launching the issue in June. The offer may be raised to Rs 20,100 crore depending on demand, the sale document said.

Marketmen expect ICICI Bank’s domestic offer to raise over Rs 13,000 crore. ICICI Bank MD and CEO KV Kamath had said that the proposed fund raising will meet the bank’s demand for funds for three years.

The two issues are expected to inject buoyancy into the primary market which saw the last big issue in December when Cairn raised Rs 5,261 crore.

Says Sunil Srivastava, senior vice-president, SBI Capital Markets: “We expect more and more big issues to come up with rising valuation of companies. This year alone, a handful of banks will hit the market to meet their capital requirements. We hope that this year’s fund collection from the primary market will exceed last year’s total collection of Rs 27,000 crore.”

The head of equity capital of a foreign bank, who did not wish to be quoted, says a successful completion of the DLF issue may attract its peers in the real estate sector to the market.

Besides March 2004’s record mop-up, Rs 6,941.51 crore was raised in December 2005, Rs 6,574.53 crore in December 2006, Rs 5,420.49 crore in July 2004 and Rs 5,358.15 crore in October 2004.

Also, the issue will provide an opportunity for FII investment in the sector. “The market capitalisation of the DLF issue will be higher than the combined m-cap of its peers. This will definitely provide higher free float to investors. The ICICI Bank issue will not have the same kind of impact on the banking sector,” he felt.

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