India IPO: No retail, no gains

Even as QFIs allocation and direct investment by foreigners become India’s crowning glory, its IPO markets seem to have rutted into a big logjam ahead of action by SEBI to revise regulations for verificaation of IPO mechanics and catching 5 promoters and investment bankers for manipulation.

According to Assocham, separately the 26% FDI in Pension funds could add $166 bln in investments and management participation by established funds could also increase the local funds for Pension schemes by

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an equal amount. The $320 bln odd would be 30% of India’s GDP and would greatly add to the 14% of GDP coming to mutual funds currently, another market which has plateaued early

The IPO markets could thus remain liquid but with a record of 2 out of 3 IPOs losing 50% of the investment, it is unlikely that retail will wean away from bank deposits and the great capital appreciation in Fixed Income as and when yields fall off the cliff and bank conditions are eased in a couple of months. Already yields are down 50 bp since November.

IPOs helped mobilise $16 bln in 2010 and only $3 bln in 2011 ( based on ET data, pg 9)

This year will again be a much higher amount albeit due to PSE divestment  even as buy back guidelines get finalised for this month