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Infotech push to the IPO market - Views on News from Equitymaster
 
 
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  • Jan 5, 2000

    Infotech push to the IPO market

    The primary markets mobilised Rs.22.37 bn in 1999 almost five times of the amount raised in 1998. Almost 62% of the amount i.e. Rs.13.77 bn was contributed by the infotech sector with another 22% by the banking sector.

    The last time the primary markets saw such a boom was during 1994-1995. During the period it was the new companies in financial services which led the boom. The quality of a number of companies, which tapped the primary market was pathetic and most of the promoters just disappeared with the money. To some extent the boom in the primary market contributed to the prolonged bear phase from 1996 to 1998 since retail investors lost faith in the market.

    The infotech issues which are coming at par fall in the same category with a number of promoters of the unknown variety. Now that the Securities Exchange Board of India has stipulated a three year track record of profitability for premium issues the quality of companies in that category seems to be better.

    However, this seems to be just the start. As the market picks up further the possibility of dubious promoters cashing in the IPO boom is not ruled out. As it is, the better run companies seem to be headed for the book building route where the allotments are made at the discretion of the company/investment bankers.

     

     

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