The segment of capital market that was under hibernation all these days has witnessed some successful IPOs. Finally, some activity is taking place in the Indian IPO primary market. The present IPO wave was kick-started in the month of February 2003 when Divi's Laboratories Ltd. issued the IPOs to make it the first issue in 2003. Divi's labs rang the bell on February 17, 2003 with an offer price of Rs. 180. By September 12, 2003 the stock was worth Rs. 915. A series of IPO issues followed Divi's. Of these issues, one IPO issue that instilled retail investors was Maruti IPO. Maruti IPO received tremendous response from the investors. It was oversubscribed by 10 times. Perhaps, this success prompted Union Minister for Disinvestment, Arun Shourie to divest five more public sector companies through the IPO route. These five firms include Videsh Sanchar Nigam Ltd. (VSNL), Bharat Aluminum Company (BALCO), Indian Petro Chemicals Ltd. (IPCL), Computer Mechanics Company Ltd. (CMC) and Indo-British Petroleum (IBP).
A decade ago, public issues were the prominent source of raising capital with corporates. Over a period of time there is a vast change in the sources of funds being used by the corporates. According to CMIE, while public issues constituted 40% of the funds that rose in 1993, the figure catapulted to a mere -54% in 2002. With the third IPO wave in progress, the figure rose to 49% in 2003. Says Prithvi Haldea, Managing Director, PRIME Database, "Significantly, the mobilization through public issues in the preceding seven-year period from 1996-97 to 2002-03 has been only Rs. 13,882 cr, which is about the same as the single year mobilization of Rs. 13,312 cr in 1994-95! Like in 2001-02, the year 2002-03 also ended with only six IPOs. Of these six too, three were floated by nationalized banks, while the manufacturing and services sector had just three issues.
The main reason for this delay in IPO issues is the `fear factor' among investors and corporates that prevailed till last year. The fear factor was the result of a series of incidents that splotched the Indian stock markets red. These incidents saw hundreds of millions of rupees being siphoned by greedy stock market bulls and cunning corporate promoters. Indian capital markets have experienced at least one huge stock market scam an year during the last decade. |
