By Robin Elsham
BOMBAY, June 21 (Reuters) - War, what war?
India's market for initial public offerings (IPOs) is shrugging off fears of conflict with neighbouring Pakistan as a flood of companies, including a startling number of industry leaders, prepare to raise as much as $6 billion.
Over the next year to 18 months, a profusion of long-awaited IPOs will hit the market, potentially raising more money than in the entire previous decade, traders say.
Coming up with $6 billion should not be a problem for an economy the size of India's, one foreign fund manager said.
"India has a domestic savings rate of about 20 percent, or about $90 billion a year. About 15-20 percent ($13.5 billion to $18 billion) goes into financial assets."
Under current circumstances, highly touted IPOs could attract much of that money.
"Interest rates are low. Alternative investments don't appear to offer attractive returns. Last year's bond party is over," said another mutual fund manager.
Primary market researcher Prime Database says IPOs with the potential to raise 300 billion rupees ($6.13 billion) are in the pipeline.
The number and particularly the size of many pending IPOs is remarkable for a country where last year only six IPOs hit the market, raising a trifling 10 billion rupees.
Even more remarkable is the quality of the pending offerings.
Waiting to hit the IPO market are Maruti and Hyundai, the two largest carmakers in India. Maruti controls 60 percent of the domestic new car market; Hyundai is the second largest and fastest-growing automaker.
Two Korean companies which have taken India by storm since the country opened its market to foreign players last decade are also poised to sell stakes in local operations.
LG Electronics is now India's largest consumer electronics and appliance maker. Samsung is just a step behind and rapidly expanding capacity.
"There are 15 mega-issues of one billion rupees plus (in the pipeline)," says Prime Database Director Sanjeev Khandelwal.
The grand-daddy of them all is the Tata Consultancy Services (TCS), the biggest company in India's fastest-growing and most promising industrial sector.
TCS, part of the powerful Tata group, is expected to raise 40 billion to 50 billion rupees by offering an equity stake of 10 to 15 percent through its IPO.
Also believed to be queuing up to issue IPOs are Star TV, India's top commercial TV broadcaster; Idea Cellular, a top company in one of the world's fastest-growing mobile phone markets; and the domestic bottling arm of Coca-Cola.
QUEUED UP
So many companies are queued up to issue IPOs because the Indian primary market has been dormant so long.
More than 1,000 IPOs hit the Indian market in financial years 1994 and 1995. But the number fell to fewer than 100 annually from financial 1997 on, as investors soured on the potential for India to rapidly transform itself into a market economy after 50 years of rigid central economic planning.
There was a brief revival at the height of the dot-com boom in 1999/00, but the demise of many of those issues served only to intensify investor suspicion.
The success of some recent issues has also fired hope this new wave of IPOs by big, established companies can find buyers.
Bharti Tele-Ventures, one of India's fastest-growing phone companies, raised 8.34 billion rupees in February through an IPO that was 2.5 times oversubscribed.
In April, state-owned Punjab National Bank raised 1.65 billion rupees in an IPO that attracted bids for four times more shares than offered.
And earlier this month an IPO by banking software products maker i-flex was 2.7 times oversubscribed, despite hitting the market at the peak of the recent border tension with Pakistan.
"Quality will always find takers," said one fund manager.
Another added investors now are compelled to look for options offering better returns.
"Interest rates are low. Alternative investments don't appear to offer attractive returns. Last year's bond party is over." (US$1=48.92 Indian rupees)