After a lull of more than two years, the market for initial public offerings (IPOs) is expected to roar back to life in 2013, giving retail investors an opportunity to buy into strong companies at attractive prices.
Several unlisted private companies, like online and phone-based local search firm Just Dial and DTH service providers Tata Sky and Videocon DTH are among more than a dozen companies that have lined up large issues aggregating more Rs. 10,000 crore.
Add the government's proposed Rs. 40,000-crore disinvestment in public sector giants like Indian Oil, Hindustan Aeronautics Ltd and Coal India, among others - a part of which will be raised from the public - and you have what promises to be a bumper year for IPOs.
Most of the analysts HT spoke to recommended that retail investors should apply for shares in well-run profitable companies.
"These IPOs will have to be priced attractively to generate support from retail investors," said Gautam Sinha Roy, vice president, equity strategy, Motilal Oswal, a leading brokerage firm.
That's because these companies will be testing the market for public issues after several lean years. The last bumper year for IPOs was 2007-08 when 104 companies raised Rs. 34,000 crore.
After that, the market went into a tailspin. Coal India's Rs. 15,400-crore issue in October 2010 and Bharti Infratel's Rs. 4,118-crore IPO in December 2012 were two exceptions to the rule.
Some analysts felt the tide has already turned in favour of IPOs. "The stock market has been steady this year and there is a lot of buying activity. This kind of environment is generally good for IPOs," said Sinha Roy.
The BSE Sensex is expected to hover around the 20,000 mark for the next three-to-four months and foreign institutional investors, who have invested $12 billion (about Rs. 53,000 crore) in Indian stocks so far this year are expected to remain active buyers.
However, Purvesh Shah, head of Indian equity markets, Barclays, a leading book runner, felt investors are still averse to risk.
"There is a clear preference for companies with predictable growth patterns coupled with ability to generate healthy profits. Sectors exposed to uncertain policy environment have continued to scare investors away," he said.
Another issue that investors should bear in mind is that the window for finding attractively price IPOs is likely to close by the end of the year.
"The general election next year adds an element of uncertainty, which will have an impact on timing of IPOs next year," added Shah.