Firms scramble for IPOs ahead of jumbo offers

A swarm of Indian companies plan IPOs in the next few weeks, tapping a market trading at 32-month highs, and rushing to get out of the way of many jumbo state-run offerings expected over the next couple of months.

This week alone, 11 new issues may be launched, and analysts said another $15 billion in new equity could hit the market by year-end if the current window of opportunity does not slam shut too soon.

"A lot of smaller deals are getting done now because it will be harder to complete them after a couple of months as bigger transactions hit the market," said Sumit Jalan, director of India global markets solutions at Credit Suisse.

The government plans to raise $8.6 billion through stake sales in the fiscal year that ends next March.                                           

Issues in the near-term pipeline include Coal India's up to $3 billion offer that is set to hit the market in mid-October, follow-on share sales in Hindustan Copper and an up to $425 million offering by property developer Lavasa Corp.

The BSE Sensex crossed the 20,000 points mark on Tuesday, its highest since January 2008, and has risen more than 11% this month on strong overseas investment flows.

"IPO deals which were in the pipeline for some time are being realised now due to favourable market conditions," said Jalan, who expects 20 to 25 IPOs over the next three to four months if markets remain strong.

That is far from certain given continued global uncertainty and the fickleness of foreign funds, which are the key driver of Indian stocks and at $16 billion to date are on track for a record year.

Indian firms have raised more than $15 billion so far this year from share sales, third in Asia after China's $103 billion worth of issuances and Hong Kong''s $18 billion, according to Thomson Reuters data.

Bankers said total equity offerings in India could reach $25 billion to $30 billion in 2010, making it the best year since 2007 when $31 billion was raised from 202 issues, and compared to $20 billion last year, the data showed.

This week's 11 offerings would be the most since 1995, Jagannadham Thunuguntla, equity strategist at SMC Global Securities, wrote in a note.

Offerings to be launched this week are in the $50 million to $200 million range, although bankers said larger issuers in the backlog of listing hopefuls may also rush to take advantage of strong market momentum.

"People have been in a state of preparedness for some time and obviously they are looking at this window of opportunity," said Dilip Kadambi, head of equity capital markets at RBS in India.

The market for new issuance will become much more crowded when public sector deals from Coal India, which could be Indias largest IPO, and a nearly $2 billion follow-on share sale in Steel Authority of India soak up demand from investors.                                        

"For the rest of the year there will be lots of IPOs coming up as part of the divestment and, in fact, there is a fear that government may crowd out private fund raisings," said Gaurang Mehta, executive director at Indian investment bank Enam.