Despite financial upturn and positive moves witnessed in stock markets, the primary market is yet to come out of the shell it went into during slowdown. The less than fair valuation and cautious retail investors are prompting promoters from diluting stake to public, say market players.
“Activity in the primary market is dependent on valuation in secondary market,” said Dinesh Thakkar, CMD of Angel Broking. “If the secondary market is down, or not fairly valued, promoters of a company would not feel confident or inclined to bring out an IPO at book value.”
For example, National Hydroelectric Power Corporation (NHPC) is being traded below the issue price of Rs 36 within a week of listing. Even Adani Power and Raj Oil Mills have not picked up as they should have.
“IPOs are not getting right price and promoters are not getting right valuation so they do not want to dilute stake to public at current valuation. Take the NHPC issue for example,” said Raj Lakshmi Narayanan, vice president, Equity and Institutional sales, Bonanza Portfolio.Though the euphoria of post-election period has died down, the market has realised that the government is stable for its 5-year term and the developmental activities are slowly but steadily progressing in the right direction.
“The current book value to price ratio in the market is around 2.5 and it is at 2.5-3 when IPOs are often seen getting boosted. If the ratio hits 3.5, then the 2007 situation of IPO boom is likely to return to Indian markets. In next 12 to 18 months, we will be seeing a spurt in IPOs,” Thakkar said.