Money on the markets

Oil India Ltd’s ads in newspapers and business glossies may help in building a much-needed tempo before its public offering of shares, but if the disappointing listing price of Adani Power and NHPC is any cue to go by, then the days ahead for costly IPOs may not be worry-free.

The energy explorer, which deferred an IPO last year amid the global financial crisis, has lined up a $500-$600 million public offering which will open on September 7 and close on September 10. The price band has been set at 950 to 1,050 rupees a share.

Several firms, including state owned, are considering share sales to fund expansion in Asia’s third-largest economy.

First off the block with an IPO was private power producer Adani Power. Its shares are hovering around the issue price of 100 rupees since day one — a reminder of the stock market debut by Anil Ambani’s Reliance Power, which raised almost $2.9 billion in India’s largest-ever IPO in early 2008 but has not closed above the issue price.

“Investors apply for IPO listing gains. It would augur well for IPOs to leave more on the table for investors,” Ambareesh Baliga, vice-president at Karvy Stock Broking, said after Adani Power’s listing.

Adani Power’s lacklustre listing has the potential of hitting investor appetite for expensive IPOs.

State-run NHPC Ltd. also made a tepid debut on Tuesday, lagging market expectations after the power company’s $1.25 billion IPO was heavily oversubscribed earlier this month. The power firm produces 4,815 megawatts and has 11 projects under construction that will nearly double its capacity.

The hydropower generator’s market debut was being closely watched by companies planning to tap the primary market for capital.

Indian firms have raised almost $10 billion by selling shares so far this year, helped by an almost 85 percent surge in the BSE index from its March low. The figure was lower in 2008.

While investor interest in IPOs by state-run firms is likely to be strong owing to their attractive pricing and history of outperformance when compared to those of private players, some analysts feel that investors are likely to get choosy as the IPO momentum picks up.

“There is a huge supply lined up for the rest of year, but our sense is not everything will get done and investors are going to push back until and unless they are convinced of the company, what it plans to do with the money and the valuation,” Vedika Bhandarkar, head of India investment banking at JPMorgan said before the start of the IPO parade.

Will the lacklustre listing of NHPC and Adani Power dampen investor eagerness for public issues and weigh on the government’s efforts to bridge a huge fiscal deficit?