The Hindu Business Line : Global IPOs raise $246 b; India ranked 8th

New Delhi June 21 The worldwide initial public offering (IPO) space in the financial year 2006 posted a record proceed worth $246 billion, according to a new study by Ernst & Young.

The report titled `Globalization' says the Indian IPO market emerged as the eighth largest with $7.23 billion in net proceeds through 78 public issues.

Across the world, companies raised $246 billion, up from $167 billion in 2005, through a total of 1,729 IPOs, led by Chinese companies at the top with net proceeds of $56.6 billion. However, the biggest number of IPOs came from the US with 187 offerings, followed by Japan with 185 and China with 175 IPOs.

"India's IPO market has been fairly broad-based in terms of transaction, although energy companies dominated with more than 50 per cent share of funds raised," the report said.

Mr Mukesh Ambani's Reliance Petroleum, which raised $1.8 billion, featured in the global Top 20 IPOs, which together raised $84 billion, representing 35 per cent of the total capital raised by all IPOs.

Capital needs

The study said that India's increasing number of larger deals has been driven by the growth of Indian corporations and their need for additional capital for potential acquisitions.

"The rapid growth in emerging market economies has resulted in a migration of capital from the developed economies into the emerging markets," Ernst & Young India's IPO Leader, Mr R. Balachander, said.

"The corporate sector is on a growth trajectory, which has significantly increased their capital market needs. India's latest and strongest capital raising trends include localisation and qualified institutional placements,'' he added.

The localisation trend in the country is evidenced by the several billion-dollar IPOs hosted by Indian exchanges. "In 2006, India's largest IPO, Reliance Petroleum raised $1.8 billion, followed by the oil production and exploration company, Cairn Energy, which raised $1.3 billion with both companies listing on domestic exchanges," it said.

Listing abroad

However, some Indian companies are also listing abroad, especially London, Singapore and Luxembourg, primarily for higher valuations and visibility, the report noted. While across the world, a vast majority of IPOs stayed local and 90 per cent of the international companies choose their primary place of listing in the market where they operate.

Besides, the cross-border activity and the role of foreign capital continue to grow and FIIs make up three-fourths of new capital flowing into the market.

"The private equity rush into India is creating the potential for many IPO exits. In 2006, private equity firms invested more than $7 billion in India. Top global private equity funds as well as local funds have been key drivers of Indian IPO markets," Mr Balachander said.

Emerging markets remained the flavour of the season with the four BRIC countries seeing combined IPO activity to the tune of $86 billion in 2006, up from $29 billion in 2005, while the number of listings almost doubled to 279, the report said.

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