News: Rush of Indian small, medium enterprise IPOs
(DNA 22/12/2006) Mumbai - The new year could see a flurry of small and mid-sized companies going public, with investment bankers saying as many as 300 could hit the bourses on 2007.
“There are thousands of unlisted companies in India. About 300 of them need a fresh fund infusion to increase capacities and streamline business models owing to growing global demand,” says Nimish C Shah, managing director of Fortune Financial Services, a Mumbai-based investment banking firm.
This means increased business for investment bankers. They confirm a lot of interest being generated and a steady flow of IPO mandates in the pipeline.
“I think small- and mid-sized companies will mop up around Rs 3,000 crore through IPOs in 2007,” said Mayank Dalal, senior vice-president of Centrum Capital, which has 25 mandates of such companies with an average issue size of Rs 40 crore.
While the list of companies lined up for IPOs includes those falling in the small and medium enterprises category, most of them are in the Rs 200-250 crore bracket in terms of their potential market capitalisation.
“I think you will see a set of companies falling inside a potential market cap of Rs 200-250 crore range and are eager to go into the next step of their businesses and tapping the IPO market in 2007,” says Vinit Suchanti, managing director of Keynote, which has 15 such companies from various sectors waiting to raise funds in the range of Rs 30-200 crore from their IPOs.
More than one-third of these companies, approximately, are in the business of auto ancillary and spread in the industrial belts of Pune, Coimbatore and Gurgaon.
As per the estimates of investment bankers, a majority of these companies are in the auto ancillary segment.
“Almost 20% of them are textile manufacturers and 15% business process outsourcing firms,” says another investment banker.
With the Indian stock market still on with one of the biggest bull-runs of all times, small and mid-sized companies will be in a position to sell their stakes at better valuations.
“These IPOs could come at an issue price which is 13-15 times the companies’ forward earnings. However, this could be cheap considering the bulky order books of these companies,” says Shah.
For these companies, the exchange’s mandate of 25% dilution of the equity capital or a minimum issue size of Rs 100 crore is not a turn-off. Further, the BSE committee set up well ahead of the approaching busy season to look into the IPOs of companies valued at less than Rs 500 crore has made the issue process simpler and faster for smaller companies.
However, the Securities and Exchange Board of India is likely to be extra-cautious on IPOs. The market regulator had recently hinted at its plans of making IPO grading compulsory, a step that could help small investors distinguish the chaff from the grain when the small IPOs hit the market.
Issue pipeline
Of the thousands of unlisted companies in India, about 300 are ready for public funds infusion
Almost 20% of the issuers are textile manufacturers and 15% BPOs
The IPOs could come at issue prices that are 13-15 times the companies’ forward earnings
“There are thousands of unlisted companies in India. About 300 of them need a fresh fund infusion to increase capacities and streamline business models owing to growing global demand,” says Nimish C Shah, managing director of Fortune Financial Services, a Mumbai-based investment banking firm.
This means increased business for investment bankers. They confirm a lot of interest being generated and a steady flow of IPO mandates in the pipeline.
“I think small- and mid-sized companies will mop up around Rs 3,000 crore through IPOs in 2007,” said Mayank Dalal, senior vice-president of Centrum Capital, which has 25 mandates of such companies with an average issue size of Rs 40 crore.
While the list of companies lined up for IPOs includes those falling in the small and medium enterprises category, most of them are in the Rs 200-250 crore bracket in terms of their potential market capitalisation.
“I think you will see a set of companies falling inside a potential market cap of Rs 200-250 crore range and are eager to go into the next step of their businesses and tapping the IPO market in 2007,” says Vinit Suchanti, managing director of Keynote, which has 15 such companies from various sectors waiting to raise funds in the range of Rs 30-200 crore from their IPOs.
More than one-third of these companies, approximately, are in the business of auto ancillary and spread in the industrial belts of Pune, Coimbatore and Gurgaon.
As per the estimates of investment bankers, a majority of these companies are in the auto ancillary segment.
“Almost 20% of them are textile manufacturers and 15% business process outsourcing firms,” says another investment banker.
With the Indian stock market still on with one of the biggest bull-runs of all times, small and mid-sized companies will be in a position to sell their stakes at better valuations.
“These IPOs could come at an issue price which is 13-15 times the companies’ forward earnings. However, this could be cheap considering the bulky order books of these companies,” says Shah.
For these companies, the exchange’s mandate of 25% dilution of the equity capital or a minimum issue size of Rs 100 crore is not a turn-off. Further, the BSE committee set up well ahead of the approaching busy season to look into the IPOs of companies valued at less than Rs 500 crore has made the issue process simpler and faster for smaller companies.
However, the Securities and Exchange Board of India is likely to be extra-cautious on IPOs. The market regulator had recently hinted at its plans of making IPO grading compulsory, a step that could help small investors distinguish the chaff from the grain when the small IPOs hit the market.
Issue pipeline
Of the thousands of unlisted companies in India, about 300 are ready for public funds infusion
Almost 20% of the issuers are textile manufacturers and 15% BPOs
The IPOs could come at issue prices that are 13-15 times the companies’ forward earnings
posted by InCar Group Press Room at 21:22
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