Indian primary market growth to fall by 50 percent

September 1st, 2008 - 4:28 pm ICT by IANS  

New Delhi, Sep 1 (IANS) The growth of the Indian primary market will halve from the 20 percent registered during 2007-08, to 8-10 percent in the remaining period of the current fiscal because of adverse market sentiments, an industry lobby said Monday.According to the Associated Chambers of Commerce and Industry of India (Assocham), both retail investors and financial institutions including foreign institutions (FIIs), are gradually withdrawing from initial public offerings (IPOs).

“Given the current market sentiments, these investors are exploring other options such as bond, mutual funds and security markets as demand for raising IPOs has been subsiding a great deal,” the Assocham analysis said.

“FIIs are pulling out of IPOs because of high inflation, and alongside, the debt and bond markets are growing phenomenally,” Assocham president Sajjan Jindal said.

“The price band of IPO is also no longer attractive for retail investors. Under such circumstances, being optimistic about IPO market would not be realistic as the fear factor against the primary market is becoming more visible and pronounced,” Jindal added.

At least 74 companies which were close to going for IPOs and collectively raise Rs.440 billion (Rs.44,000 crore) are now awaiting better times. Between February and August, 25 IPOs were floated in the market raising only Rs.43.45 billion.

“Naturally, those who were to use IPO money for new projects, expansion and working capital will either postpone plans or borrow from banks to fulfil commitments,” Assocham said.

“Many infrastructure projects in the fields of power, roads, and housing complexes may suffer for want of money, and this in turn may hamper industrial development in general,” the chamber said.

“Moreover, IPOs act as a source of 10 percent of household saving which flow into equities with an annual flow of $25-30 billion for retail investors,” Assocham said.

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