India At The Pinnacle of IPOs

BRIC IPOs had a 41% share in the global IPOs listed worldwide in 2007. What’s shocking is that even after the recent dismal performance of most global markets, a recent report by Ernst & Young on Global IPO Trends states that IPOs will witness a 20% rise annually.

On the flipside, another study by Ernst & Young recently done on Comparison of Global Stock Exchanges ignored exchanges of countries like India, China and Brazil. These countries were grouped as RoW(Rest of the World) in the study, even though they had a share of 53.7% of all IPOs listed worldwide between the period 2002-2007.

India in particular can be proud of the fact that it had one of the largest IPOs of the world in terms of capital raised in the year 2007 - that of DLF limited which raised proceeds worth $1,933 million. It also witnessed the 3rd largest IPO in the world in the first quarter of 2008 – that of Reliance Power Limited which raised proceeds worth $2964 million. In fact, 2 out of the Top 10 Largest IPOs in the world for 2008 so far, are from India (Reliance Power Limited and Rural Electrification Corp.). The rate of growth of IPOs in India has fallen by 4% this year largely due to weak global cues, resulting in the withdrawal of several IPOs, like that of Wockhardt.

The IPO activity overall in India has gone up by 1700% in the last 10 years. This growth has dwarfed that of any other stock exchange in the world. The top sectors that are witnessing the maximum amount of investments are:

1. Financials
2. Energy and Power

The countries most actively investing in global IPOs are China and The Middle Eastern Countries. These regions host the world’s largest private equity firms, the best known among then being ADIA (Abu Dhabi Investment Authority). But it is expected that Private Equity backed IPOs in the year 2008 will fall by one-third of the current 40% of all IPOs. What is of interest at a time like this is that the outlook for the Financial and Energy & Power sectors is supremely positive for the next 10 years keeping in mind the current energy crisis and global financial risk mitigation picking up heat. As per Mr. Gokul Laroia – Managing Director, Head of Capital Markets (Asia) for Morgan Stanley, investors largely prefer China and India not because of the fundamentals but because of their unambiguous growth proven in the past.