India’s market for new offerings falters

India’s market for new offerings falters

By Joe Leahy in Mumbai

Published: February 8 2008 18:58 | Last updated: February 8 2008 18:58

India’s market for new offerings, which last month was the hottest in the world, seized up on Friday when Emaar MGF Land was forced to pull its float at the last moment because of “adverse” market conditions.

The initial public offering was the second in India to be abandoned this week, marking the end of a long bull run in equity capital-raising in the country and throwing the spotlight on Reliance Power, the country’s biggest listing, which is set to begin trading Monday.

Emaar MGF, a developer, said it abandoned the float “as a result of the prevailing adverse market sentiments, fuelled by renewed indications of a US recession and global meltdown”.

While companies in other markets have been pulling their IPOs, India had been spared, with Indian companies this year expected nearly to double last year’s record volumes for new share issuance of about $8.3bn.

India’s rush of offerings hit a brick wall this week when a smaller float, the $165m listing of Wockardt Hospitals, collapsed after receiving minimal demand, and several other companies began struggling to fill their order books.

Emaar by Thursday night had received offers for about 85 per cent of the shares available after extending the listing period once and cutting the price range twice.

It appeared set to be able to cover fully the offering by its close on Monday.

However, one person familiar with the offering said investors who had filed bids began withdrawing them, leaving Emaar with demand for just 43 per cent of the shares on offer.

Vallabh Bhanshali, chairman of Enam Securities, one of the banks leading the float, on Friday denied this, saying the decision to pull the deal was made before investors began to withdraw.

“The decision was centred around the fact that we did not have orderly markets,” he told CNBC TV 18, a local broadcaster.

Reliance Power’s $3bn float sold out within a minute of opening in mid-January, but it is now looking expensive after recent sharp falls in India’s market.

The company has few operating assets but is controlled by Anil Ambani, the billionaire businessman and member of a family whose ability to generate stock market wealth is legendary among India’s retail investors.