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On primary markets

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S Ramesh
COO, Kotak Investment Bank
Date : 17 Feb 10 | 09:30 AM
Smartinvestor : Hi, this is Rajesh Bhayani and our guest today is S Ramesh, COO, Kotak Investment Bank
Smartinvestor : Hi Ramesh, looking at the response to the NTPC issue and some recent issues before that, how is the future for primary market looking?
S Ramesh : Indian primary markets have had a great run since May 2009. Several issuances of QIPs and select IPOs happened during this period. Having said that, primary markets typically follow the sentiments of the secondary markets and secondary markets are currently volatile and are reacting to global events. Additionally, there is a large issuance pipeline for the current calendar year. Certain primary issuances have listed below their offer price, making investor sentiment circumspect. I believe issuances with a strong track record and decent pricing will continue to receive a good response. Issuers have to be careful and lucky not to get caught amidst market turbulence during the issuance period. Responses to primary issuances could be inconsistent and therefore, issuers have to be dynamic in responding to the changing developments.
Smartinvestor : Estimates have been made of Rs 1.5 lakh crore to Rs 2 lakh crore being raised through primary issuance and disinvestment. How will this be achieved?
S Ramesh : My belief is that not all issuances will go through. Investors have become more selective and discerning. Good quality, large issuances will be more liked as long as they are well-priced. Government company issuances in the past have been the darlings of the market and hopefully will continue to remain so. All in all, it is a time for issuers to be more conservative about their offerings as leverage is still in the hands of investors.
Smartinvestor : So the short term future of the IPO market is bleak?
S Ramesh : The IPO market will be choppy. We have to price in volatility to ensure success of issuances. Investors are slowly becoming risk averse.
Smartinvestor : The response to NTPC was tepid because the price benchmark was available as it was already listed. Don’t you think follow-on offers faces this risk?
S Ramesh : Follow-on offers will be more challenging especially in volatile markets. These issuances should be done on the back of certain anchor demand and a reasonable discount to motivate investor demand. I believe that good quality paper will continue to get a good response.
Smartinvestor : Is the French auction a good system or need to be reviewed?
S Ramesh : It is a good innovation and a new concept should not be judged from the response to one issue. Like anything new, it will go through a learning curve and in the medium to long-term will become a time-tested option for issuers to avail of.
Smartinvestor : How will IPOs from private sector get affected?
S Ramesh : I remain reasonably bullish about the prospects of the Indian economy and the Indian capital markets for calendar years 2010 and 2011. There will be the occasional tremors of global events, which may impact the primary market for a short period of time. The private sector should be able to mobilise equity from the capital markets, carefully navigating through these tremors. Efforts also have to be made to increase the domestic pool of money (especially from the insurance companies) to invest in primary issuances.


Replies

22 Mar 11 at 08:29 PM
By: Rajnish Kumar

Good Evening sir
My concern is that what is the proccess for foreng remidence in case of inword

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