The Indian IPO Market in Early 2008

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Case Details:

Case Code : BENV016
Case Length : 18 Pages
Period : 2006-2008
Pub Date : 2008
Teaching Note :Not Available
Organization : -
Industry : Financial Sector
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"The IPO market is important from the economic perspective; it gives opportunity for companies to raise resources and acts a channel for investors to invest in such companies."¹

- Devandra Nevgi, CEO and CIO of Quantum Asset Management Company Private Ltd², in February 2008

"Sentiment is a common thread between primary and secondary markets. Aggressively priced IPOs and those with massive oversubscription, without full financing, can signal that perhaps the market is getting too hot, as they did most recently."³

- Pankaj Vaish, MD and head of equities and fixed income liquid markets at Lehman Brothers⁴ in Mumbai, in February 2008

"The Indian corporate sector is strong and buoyant. The Indian market alone can give a 20-22% return on equity. Things are bound to improve, the question is: How soon?"⁵

- Ramdev Agrawal, Director of Motilal Oswal⁶, in January 2008

Introduction

In the first half of February 2008, Wockhardt Hospitals Ltd. (Wockhardt),⁷ Emaar MGF Land Ltd. (Emaar MGF)⁸, and SVEC Constructions (SVEC)⁹ withdrew their Initial Public Offerings (IPOs) owing to poor investor response.

Some analysts were of the opinion that overpricing was the main reason for their withdrawal, while others felt that the turmoil in the global financial markets had played a larger role. Still others were of the view that the IPO of Reliance Power Ltd. (RPL), part of the Reliance Anil Dhirubhai Ambani Group¹⁰ (ADAG), which opened on January 15, 2008, was responsible for the tepid response to these three IPOs, as the RPL IPO had sucked out liquidity from the market.

The Indian IPO Market in Early 2008 - Next Page>>

1] Rajesh Gajra, "Withdrawal Symptoms," www.businessworld.in, February 25, 2008.

2] Quantum Asset Management Company is one of India's first equity research companies. (Source: http://www.qasl.com)

3] Rajesh Gajra, "Withdrawal Symptoms," www.businessworld.in, February 25, 2008.

4] Lehman Brothers, founded in 1850 and headquartered in New York, is a leading firm in equity and fixed income sales, trading and research, investment banking, private investment management, asset management, and private equity. (Source: http://www.lehman.com)

5] Madhur Singh, "Is Booming India Immune to a U.S. Downturn," www.time.com, January 24, 2008.

6] Motilal Oswal Securities is a leading research and advisory based stock broking house of India (Source: http://www.motilaloswal.com)

7] Wockhardt Hospitals is part of Wockhardt, a leading pharmaceutical and biotechnology company in India. As of early 2008, the company operated 12 hospitals at Mumbai, Hyderabad, Nagpur, Surat, Rajkot, Bengaluru, and Kolkatta.

8] Emaar MGF Land Limited is a joint venture between Emaar Properties PJSC (Emaar) of Dubai and MGF Development Limited (MGF) of India. Emaar is one of the world's leading real estate companies and MGF is one of the key players in retail real estate development in Northern India. The company started its operations in India in February 2005. (Source: www.emaarmgf.com)

9] SVEC Constructions, which was founded in 1985, is a leading construction company in India. (Source: http://www.svec.in/aboutus.htm)

10] The Reliance Anil Dhirubhai Ambani Group is a group of companies headed by Anil Ambani. The Group companies include Reliance Capital, Reliance Communications Limited, Reliance Energy Limited, Reliance Health, and Reliance Media and Entertainment. (Source: http://www.relianceadagroup.com)