USD 190 billion is the demand for the USD 2.5 billion Reliance Power IPO and it is a record for the Indian markets.
The issue, which closed today, has attracted a whopping USD 190 billion. It has been subscribed 72.5 times, with the QIB portion being subscribed 80 times. The HNI portion has been subscribed 200 times and the retail portion has been subscribed 15 times.
The issue has broken the record set when Mukesh Ambani's Reliance Petroleum tapped the capital markets. The retail portion of the IPO has seen 45 lakh applications, more than double the 21 lakh applications garnered by the Reliance Petroleum IPO’s retail portion.
Speaking to CNBC-TV18, Vallabh Bhansali, Chairman, Enam said that they were slightly surprised by the overwhelming response. He added that the response has come on the face of some of the worst markets seen in recent times. According to Bhansali, good IPOs are priced well and will continue to receive good response.
Excerpts from CNBC-TV18’s exclusive interview with Vallabh Bhansali:
Q: Were you slightly surprised, especially by the kind of response seen from HNI?
A: We were all surprised by the overwhelming response in each of the categories. We were absolutely overwhelmed.
Q: Where has the demand come from? Could you give us a slightly more detailed breakdown?
A: It has come from every nook and corner, from institutional investor of every shade. It has come from every investor around the country. It has come from HNIs and corporates and every kind of investor one could think of. This has come very significantly on the face of some of the worst markets that we have seen in recent times.
Q: Around USD 1.5 billion was withdrawn, by foreign investors, in the last three days. That is USD 133 billion in market cap wiped out in a week, not quite the best conditions for this and many more IPOs that are lined up. What is your thought on the environment?
A: We have to reckon with this environment. I think people are conscious that the US is going through a difficult phase and it has to have an effect on global markets. But one does not know on what week, day and hour, when this trouble strikes. I think it just so happened that it has been striking this week.
I do think that India is a very good story, wherever these stocks had run-up. So, maybe there is a correction. But the good IPOs priced well and will continue to receive good response.
Q: We have seen foreign institutional investors withdrawing large sums of money in the last three trading sessions. Now we know what is going on in the US. But how optimistic are you that this is just a correction and we will see money coming back into India?
A: The result season is still not over; it has just started. I think the results, starting with the technology results, have been good and will continue to be the main plank, which will attract money. We are seeing some slowdown in some areas of the economy, but the services sector continues to be very strong.
The market has been very intelligent, in terms of punishing stocks, wherever the rally was unsustainable. Therefore, for the last several days, we have seen some categories of stocks go down continuously, even when the broader market was rallying.
So, you are seeing intelligence at play. You are not seeing extraordinary panic or hurt behaviour beyond a point. This is a market, which is driven largely by retail. That is a cause of worry, but it also corrects itself as it has.
So, all in all, the fundamentals of India continue to remain strong, even if industrial production seems to be slowing down for a while. It is the relative attractiveness of India, compared to lot of other markets in the world and that will continue to be the theme.
Q: Were there any anxious moments? We saw the markets correcting and correcting so sharply just when the IPO opened?
A: I think we had some anxious moments, at some point of time, whether the panic will reach to the FIIs particularly and would there be any withdrawals. But that was only internal because over the last night, when the global markets were not really giving great comfort, we saw continuous and sustained interest of FIIs.
On January 18, as soon as the day opened, we were able to get large orders into the book. I believe other lead managers do the same thing. So, the anxious moments were really more in our mind. There was no evidence of any withdrawal, at any point of time, in any segment. So, this has been an extraordinary overwhelming experience.
Q: Initially you talked about the impact of the global market meltdown on the IPO pipeline. Do you actually see the IPO pipeline drying up for the moment, if the situation does not improve?
A: Some times what happens is that if you see quality companies come to the market, people reserve the money for the IPO market, rather than put it in the secondary market. Sometimes they withdraw that money because in the IPO market, particularly in QIPs, people see good prospects of getting the allocation that they want.
So, there is difficulty in the market and the pricing has to be attractive for the IPOs to succeed. But we have seen the demand for Future Capital and we have seen extraordinary demand for Reliance Power, in the face of these markets.
Therefore, one likes to think that there is a discerning decision or discerning mechanism in play and people are trying to buy good companies for the long-term and withdraw from segments and stocks, that they see as overpriced in this market.
Q: Are you are expecting a record breaking opening as well?
A: Why not.
Source: Moneycontrol.com
Saturday, January 19, 2008
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