Last fortnight china showed the world a good way to defy the global carnage in equities and commodities. The country's primary market closed its largest ever initial public offering (IPO), with Bank of China raising $9.7 billion (Rs 43,650 crore) on May 23. The portion allotted to retail investors was oversubscribed 80 times, and shares allotted to institutional investors were oversubscribed 20 times. If China can do it, the question lead managers and issuers are asking themselves, is: Can Indian IPOs also pull through? The travails of Air Deccan (see Belly-landing), which had to extend the issue period and rejig the price band, are still etched in memory, although the low-cost airline did succeed in finishing off with an oversubscription number of 1.23. Yet, the nearly 20 per cent fall last fortnight in the indices, and the stomach-churning volatility all along will have issuers worried, and investors thinking twice. "Issuers will take into account the market volatility and the market sentiment in deciding both the timing and the pricing of the offering," says Srinivasan Subramanian, Head of Capital Markets, Enam Financial Consultants. Others aren't so sanguine. Prithvi Haldea, Managing Director of Prime Database, believes IPOs are unlikely to hit the markets unless stability returns. "Unlike in the past, today companies raise money for expansion, acquisition, and retirement of debt, so the urgency to raise money is not great," adds the primary market expert.

With the market at lower levels, valuations too will naturally have to be reworked, on the lower side. And there are some companies that may feel public issues aren't the best way to raise money, preferring private placements instead. The markets might, thus, see more transactions like the recent placements by GMR Infrastructure to IDFC and ICICI Venture (GMR Infrastructure is reportedly still negotiating with more financial investors). The situation is worse in the case of follow-on issues. Any volatility in the stock price during the issue period can cause the issue to fail. Four of the last seven follow-on issues are quoting below issue price. In fact, 14 of this year's 33 IPOs are below that threshold.

Of course, there are those who believe that there will always be appetite for "good quality" IPOs. "By good quality, we mean good company, good promoters, fair pricing and money being raised for the right reasons," says Naval Bir Kumar, Managing Director, Standard Chartered Mutual Fund. When you find such an offering, write in to us about it.

Belly-landing
Air Deccan's IPO scrapes through in a rough market, but did it deserve better?

By Kushan Mitra

Air Deccan's Gopinath: Keeping his fingers crossed

Falling markets can do strange things to people. G.R. Gopinath, Managing Director, Deccan Aviation (operators of Air Deccan), for instance, began thinking of the fall from grace of the Shankaracharya of the Kanchipuram Mutt when his airline's Rs 450 crore initial public offering (IPO) got tossed around in last fortnight's bear bashing. "If someone like that could fall the way he did, we were nothing," says Gopinath.

The IPO eventually did scrape through with a 1.23 times oversubscription. But it doesn't hold a candle to the last airline issue-that of Jet Airways, which went public in early 2005, and got oversubscribed 12 times. Gopinath believes some competitors spread canards about the IPO. "There were messages flying around implying that we would withdraw the issue." Instead, he preferred to extend the issue by three days and brought down the floor price from Rs 150 to Rs 146 to entice more retail buyers. The price Air Deccan lists at might well determine whether those investors begin flying with him too.