Banks, issuers look to Indian election to end IPO drought

Mumbai: GMR Energy, , a unit of GMR Infrastructure has planned to file an IPO prospectus in order to raise about $250 million. Many capital-starved companies  are dusting off listing plans in the expectation that elections will usher in an investor-friendly government headed by Bharatiya Janata Party leader, Narendra Modi.

Fresh equity sales in India slowed sharply in 2013 to $9.4 billion, down from $15 billion in 2012 and a record $31 billion in 2007, as slowing economic growth, corruption scandals and delays in project approvals battered sentiment.

Investor hopes that the BJP, led by its prime ministerial candidate Modi, will prevail in the election sent the stock market to a record high. "A stable government after the election, which should be able to end the policy paralysis and remove some of the hurdles in doing business, will be a major enabling factor in reviving the IPO market," said Harish H.V., Head of Corporate Finance in India at advisory firm Grant Thornton.

While the United States is in the midst of an IPO boom, a market rally that began in September in India has yielded little fresh issuance."Barring a few firms, there's nothing fundamentally wrong with names that were looking to do an IPO for the last couple of years but were unable to," said the head of India equity capital markets at a European bank.

GMR Energy wants to list in order to raise capital and provide an exit option for investors such as Singapore state fund Temasek Holdings, the sources with knowledge of the deal said. They declined to be named as the IPO plans were not yet public. The BJP is perceived to be more business-friendly than the ruling Congress-led coalition, which is on the back foot over corruption scandals that have stifled decision-making.

WINDOW OF OPPORTUNITY

‘If the BJP wins with a strong mandate, it is almost certain to need support from coalition partners to form a government,’ stated the bankers. Mahanagar Gas Ltd, a joint venture of Britain's BG Group Plc, India's state-run GAIL Ltd and the Maharashtra state government, is likely to file papers in June for an IPO that would raise about $150 million. Great Eastern Energy Corp, a London-listed Indian coal bed methane gas producer, is gearing up to launch an IPO in India to raise about $50 million soon after the election.

It is also considering an IPO in the third quarter of 2014.The last sizeable listing in India was by search provider Just Dial Ltd, which raised about $165 million in June 2013. It was the biggest deal since Bharti Infratel Ltd's $750 million IPO in December 2012.

A revival in Indian equity issuance would bring relief to investment banks, many of which had to fire staff to cope with a dearth of deals and shrinking fee pool.Total equity market fees in India fell by a third to $49 million in 2013, with Standard Chartered Plc, India's Kotak Mahindra and UBS AG. Some bankers warned that investors would be cautious about IPOs coming to the market in 2014.