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India and other BRIC nations to lead recovery of Global IPO mark
Rina Sinha | 05 Apr 2010

The Ernst & Young Institutional Investor IPO survey 2009, highlights the likely markets and sectors that will lead listing activity in 2010. The survey is , based on responses from more than 300 institutional investors across the world.

Mumbai, 6 November, 2009 - The Ernst & Young Institutional Investor IPO survey 2009, highlights the likely markets and sectors that will lead listing activity in 2010. The survey is, based on responses from more than 300 institutional investors across the world.

IPO in emerging markets set to recover first from the economic downturn

Investors believed a handful of IPO markets worldwide would show recovery by the end of 2009. India (57%), China (75% of respondents) and Brazil (57%) were highlighted as the most likely with the US (31%) and Singapore (30%) suggested, as other possibilities.

R Balachander, Partner and IPO Leader, Ernst & Young, comments:

"IPO activity in the last two quarters confirms that some IPO markets are making an early recovery, notably in the emerging economies of, India, China and Brazil. A stable government and booming sensex has led to the revival of IPO activity. There was pent up demand for capital, and Indian corporates were quick to realise that investors were looking for fresh avenues to deploy funds. All this augured well for the capital markets and the first signs of revival were visible in the series of successful Qualified Institutional Placement s (QIPs). IPOs followed soon thereafter"

Commenting on the IPO market, he said, "As the markets bounced back, we are seeing that a number of companies are once again preparing for listing. More than a dozen IPOs have happened in the last few months, most of them successful in terms of subscriptions, though we have not seen frenzied response from retail investors as was the case in 2007 an early 2008."

Bala added that going forward companies need to be less aggressive on pricing and should consider leaving a little more on the table for investors.

Top industry sectors expected to recover first

Thirty-eight per cent of the respondents in India felt that mid-cap companies will get into an IPO mode first. Amongst them companies from the power, real estate, infrastructure and PSU disinvestment will lead the pac. However, globally investors believe that the technology sector will lead IPO recovery, followed by financial services and the oil and gas sector.

The global survey further reveals the importance of financial factors in influencing the IPO investment decision-making process. In the 2009 survey Debt to equity came right on top in It will be interesting to note that this was only the 9th most important financial factor in the 2008 Institutional Investor survey.

"Our 2009 global survey result highlights investors' concern with companies' leverage, as a result of the financial crisis.- Investors are looking for less risky investments, which mean that they are more concerned with debt to equity ratios and invest in companies that performed well in the downturn and are able to service their interest and debt. When the market returns, investors will require a track record of significant growth," concludes Bala.

For many of the developed markets like the UK, Australia and Germany (all 57%) and Canada (62%) investors believed domestic IPO markets will start to recover between Q1 2010 and Q2 2011. A surprisingly large minority in many major markets - in France and Japan up to 42% - of investors thought a recovery could be more than 18 months away