Wednesday, June 25, 2008

IPO outlook to remain bleak for 2008

by Jo Black

A recent study conducted by ASSOCHAM Eco Pulse (AEP) reveals that weak investor sentiment in stock markets, easier ECB norms, high inflation rate and economic slowdown have depressed the overall outlook for the IPO market in the year 2008.

The ASSOCHAM Study “IPO Outlook 2008”, said that companies have been shying away from the primary market as the number of new offerings dropped to just one in both April and May.

A large number of companies are planning to postpone their investment plans or are opting for external borrowings.

This is primarily because of the difficult time economy is going through on account of high commodity prices, reduced capital inflows, high interest cost and global recessionary expectations.

The situation in the IPO market may improve in the last two to three months of the year if the economies, like the US and UK, come out of the recession cycle, and inflation comes down owing to base effect and steps taken by the government, said the ASSOCHAM President, Mr. Sajjan Jindal.

Mr. Jindal further said that as per the AEP Study on the number of primary market issues declined to 19 in the first five months of the calendar year 2008, from 44 for the corresponding period of the last year, the amount raised was Rs. 162.5850 billion ($4.06 billion).

Considering the pace, the year may witness around 30 to 35 public offerings as compared to 101 IPOs in 2007

Around 90 per cent of the amount raised during January- May was restricted to the power and construction sector.

Reliance Power alone accounted for 60 per cent of the funds raised from primary market during the period.

 

 

 

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