Small ICE companies dominate IPO market

Small ICE companies dominate IPO market
ENS ECONOMIC BUREAU

MUMBAI, JULY 4: The continuing demand for infotech blue chips on the stock market is attracting promoters to the initial public offering (IPO) market. As many as 40 companies raised equity aggregating Rs 455 crore through IPOs in the first quarter (April-June) compared to just four companies raising a paltry Rs 53 crore in the corresponding quarter of the previous year. The equity issuances were dominated by the ICE (infotech, communication and entertainment) sector, which accounted for 98 per cent of the total equity mobilisation.

While the infotech segment accounted for Rs 332 crore or 73 per cent of the total amount through 33 issues, Rs 88 crore or 19 per cent were mobilised by four media issues and Rs 30 crore or six per cent by one telecom company.

According to Prithvi Haldea of Prime Database, issue-related guidelines, specially the entry barriers, need to be streamlined and standardised. An area which needs immediate attention is "quality, quantity, format and delivery of information disclosure which has to improve information disclosure which has to improve substantially and become more relevant to the retail investor, specially if we insist on continuing with his direct participation in IPOs," he said.

The first quarter was dominated by small issues as most large issuers opted for deferment. The average size of the issue was only Rs 11 crore, and as many as 29 of the 40 issues were below Rs 5 crore. However, there were no debt issues during the quarter. The next few months are expected to witness large debt mobilisation by ICICI and IDBI.

Prime says there are already 63 companies holding Sebi approval while another 41 issues are being vetted by Sebi. This apart, more than 360 companies have announced their IPO plans which include 15 PSU banks.

``The significant amount was raised in the primary market despite the crash in the secondary market in April which led to the preconditions that the IPO market is set to disappear,'' Haldea said.

Haldea claims that the primary market will get a shot in the arm if "at least a part of the PSU disinvestment target is achieved through offerings to the retail investors at discounted prices. The huge success of the VSNL public issue and the post-issue gains are good reasons for inviting the small investors to participate further in PSU offerings."