India’s IPO markets are well placed to recover, once the global economy improves.
After a solid performance in 2010, India’s IPO market was quiet last year. Worries about the global economy, receding growth and a lackluster secondary market dampened investor enthusiasm for newly listed companies; 80% of recent IPOs traded at a discount in 2011.
That affected new issues, with almost no new IPOs coming to the market. Listings worth around US$7b were either scrapped or deferred, but the IPO pipeline is strong; 91 companies have filed a draft prospectus with the Securities and Exchange Board of India.
A conscious government
Steps have been taken to revive interest in the primary markets, and this government initiative should improve the situation. Foreign nationals are now allowed to invest in equities directly, with the regulator also taking steps to make the stock market more investor–friendly.
We expect such measures to help the IPO market and that once global sentiments have turned positive, the already prominent foreign institutional investment in India will be further encouraged.
The fundamentals are solid
Short–term concerns aside, the growth prospects for companies in India are good and there is a healthy appetite for capital. The government is likely to list some large state–owned companies in 2012, which will help to improve market sentiment, as the shares are likely to be available at a discount to retail investors.
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