By Arvind Padmanabhan, IANS
New Delhi : Fuelled by a robust performance of Indian stock markets in 2007, which sent a key stock index soaring over 45 percent, Indian companies mobilised a record amount from public offerings during the year, estimated at $8.3 billion.
As many as 95 companies came out with initial public offerings in the first 11 months of the year to raise that amount, compared with 78 public offers worth $7.23 billion in 2006, says Ernst and Young in a study earlier this week.
The record mobilisation from capital markets was also facilitated by an equally strong performance of stock markets, with the sensitive index (Sensex) of the Bombay Stock Exchange, a benchmark for the performance of Indian equities, rising 46.57 percent during the year, as on Dec 28.
“The surge in initial public offering activity in India is a clear reflection of the growth in the Indian economy and the investor confidence in India Inc,” said R. Balachander, head for public offers with Ernst and Young India.
“The corporate sector is on high growth trajectory resulting in marked increase in their need for capital,” he said, as India was ranked seventh in the world in resource mobilisation through public offerings in 2007.
A similar annual review by Prime, a noted database on capital markets, estimated the mobilisation by Indian companies from the capital markets – both initial and follow-up offerings – at Rs.451.37 billion ($11.28 billion).
“This is 83 percent higher than the previous year, which had seen raisings of Rs.246.79 billion ($6.17 billion),” said Prithvi Haldea, chairman and managing director of the database.
“A highlight of the year was the entry of real estate sector in listing domains in a big way. Real estate companies through 12 issues dominated with 33 percent share at Rs.151.85 billion ($3.79 billion), led by DLF.”
While the robust performance of the Indian economy, which grew by over 9 percent during the year, was a major contributing factor, the strong gains in secondary markets also fuelled the unprecedented growth of the primary market offering.
Even though the stock markets faced several tremors mid-year, which had sent the Sensex crashing on many an occasion, the year ended on quite a positive note, as reflected by the handsome gains made by this barometer index.
By mid-May, in fact, when the Sensex was just above the 14,500-point level, market capitalisation at the Mumbai exchange topped the $1 trillion mark.
The index, a basket of 30 representative stocks, stood at around 13,800 points at the close of 2006 and in the 52 weeks of trading during 2007, it scaled many a peak to decisively end above the 20,000-point mark as on Dec 28.
This translated into a gain of over 6,400 points, or more than 46.6 percent. If large-cap stocks were the flavour of 2006, small-cap shares dominated this year – with the index for such stocks rising more than 85 percent.
Even the mid-cap index outperformed the Sensex, by gaining around 65 percent, as per data with the 138-year-old BSE.
The bourse’s index for 500 stocks was up 61 percent, while those for 200 and 500 stocks gained over 58 percent each.
But not all counters could give matching returns, as sector-specific indices of BSE showed. The IT index actually fell 13.67 percent, while those for auto and technology stocks grew by just 1.39 percent and 8.20 percent, respectively.
On the other hand, the metal index clearly reflected the flavour of 2007, as the index outperformed the Sensex twice over, and ended the year with a gain of over 120 percent, while that for power was not far behind with 119.33 percent.
Consumer goods index was another that registered triple-digit growth, while the gains made by the indices for banking, public sector undertakings, realty and banking, ranged between 60 and 85 percent.
While some policy issues like curbs on the participatory notes of foreign funds caused the markets to fall, other decisions like permission to registered trusts and state-run enterprises to invest in stock markets boosted sentiments.
The year also saw Indian markets rising on the strengths of domestic players, as on many a week, key indices soared despite net outflow of funds from the foreign institutional investors.
Yet, these funds ended the year with a net investment of $16.995 billion in the Indian stock markets in 2007, as against $7.993 billion last year, showed data with the markets watchdog, Securities and Exchange Board of India (SEBI).
“Indian equities produced another stellar year with absolute and relative gain,” said Ridham Desai, a noted equity analyst with Morgan Stanley, commenting on the performance of the Indian share market, as part of the global strategy bulletin.
“India is on course to finish the year as the third-best emerging market. Mid- and small-caps regained their edge over large caps, though the bulk of this has happened in the closing stages of the year.”
Looking ahead, analysts and merchant bankers predicted the fundamentals of the Indian economy to remain strong during 2008, as a result of which the equities market should continue to perform well.
“While a global economic slowdown and credit market dislocation could adversely affect the Asian markets, the domestically-driven Indian market is relatively insulated,” said foreign brokerage firm USB.