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By Sumeet Chatterjee
MUMBAI May 19 Narendra Modi's landslide
election win is set to trigger billions of dollars in share
sales by Indian companies riding market optimism, but big-ticket
IPOs may have to wait until the new leader proves he can deliver
on promised reforms.
Indian stocks hit a record high on Friday as investors
cheered results showing Hindu nationalist Modi's pro-business
Bharatiya Janata Party won a clear majority and the mandate to
pursue reforms without having to haggle with minor parties.
Several brokerages lifted their outlooks for India's
benchmark index and companies were queuing to ride the
wave of political euphoria that began to build weeks earlier as
opinion polls predicted a resounding Modi victory.
"That will spark renewed interest in deals and
capital-raising," Viral Gathani, of CIMB Investment Banking in
Hong Kong said, when asked about the impact of Modi's emphatic
victory on India's moribund market for new share issues.
He said many companies that had put share issues on hold
would now consider dusting off their plans.
On Monday, private sector lender HDFC Bank said it
would seek shareholder approval to raise up to 100 billion
rupees ($1.69 billion) in fresh equity.
Smaller rival Yes Bank, whose stock price has
almost doubled since the end of February, is likely to raise
about $400 million in new shares within a month to bolster its
balance sheet, sources with direct knowledge of the matter said.
Bankers for two separate Indian infrastructure business
trusts worth a combined $1 billion to be listed in Singapore
decided, after exit polls last week, to kick off preliminary
marketing as early as this week, sources said.
L&T Infrastructure Development Projects Ltd (IDPL), a unit
of engineering conglomerate Larsen and Toubro, plans
to raise about $600 million through a Singapore trust listing,
while Infrastructure Leasing & Financial Services Ltd (IL&FS) is
also planning an offering of around $400 million in Indian wind
power assets, bankers said.
The bankers declined to be named as they were not authorised
to speak to the media about deals and political issues.
A sluggish economy and stalled bureaucratic decision-making
for the past two years have battered Indian corporate sentiment
and thwarted capital investment. The last large IPO was Bharti
Infratel's $750 million listing in late 2012.
For IPOs of $500 million or more to come to market in India,
issuers and investors will need to see a quarter or more of
stock market buoyancy as well as progress on economic reforms,
bankers and fund managers told Reuters.
"IPO revival will take time as the market move and sentiment
change has happened very fast. However, secondary sales, QIPs
(qualified institutional placements) should start in a big way,"
said Sandip Sabharwal, chief investment officer at Sun Capital.
IPO issuance in India has almost ground to halt, with last
year's total of $342.7 million the lowest since 2001, Thomson
Reuters data showed. In 2010, the last significant year for IPOs
in India, the total was $8.5 billion.
India ranked 11th in Asia excluding Japan in 2013 for IPO
proceeds, lagging smaller economies such as the Philippines and
In 2014, new Indian listings have raised just $78 million,
compared with $99 million for the same period last year.
Money raised in follow-on sales of new equity and secondary
sales of existing shares has totalled $3.1 billion so far in
2014, compared with $9.2 billion for all of 2013, data showed.
A revival in equity issuance would bring relief to
investment banks such as Bank of America Merrill Lynch,
Barclays and Morgan Stanley which have been hurt
by weak fee income that in turn has led to banking job cuts.
Overseas investors, usually the biggest buyers of large
Indian share sales, have poured $6.5 billion into Indian stocks
this year, which augurs well for new offerings.
Great Eastern Energy Corp, a London-listed Indian
coal bed methane gas producer, decided over the weekend to
proceed with a $50 million India IPO in two to three weeks, a
source with direct knowledge of the matter said. The company
declined to comment.
Others looking to tap the market soon include microlender
SKS Microfinance, which aims to raise up to $75
million in a share sale as early as this week, two sources with
direct knowledge of the deal said.
Spokesmen for L&T IDPL and Yes Bank did not respond to
emails seeking comment, while a spokesman for SKS said the
company would not comment beyond its February statement
announcing plans to raise capital through a share sale.
IL&FS officials were not immediately available for comment.
"For companies which have been in a state of preparedness,
the market rally and all this euphoria around Modi is a nice
window of opportunity," said the equity capital markets head of
a large U.S. bank in Mumbai.
"Others will now look to put their IPO or secondary offering
plans on the fast track and that's what we are seeing happening
on the ground. Six months back, companies were not willing to
come to the table and now it's just the opposite."
($1 = 59.0300 Indian Rupees)
(Additional reporting by Denny Thomas, Nishant Kumar and Elzio
Barreto in HONG KONG and Saeed Azhar and Daniel Stanton in
SINGAPORE; Editing by Tony Munroe, Mark Bendeich and Mike