It’s not size, but quality & price that matter!!

At a time when the economy is growing, it's not surprising that corporate India's need for capital to finance expansion and acquisitions too has increased manifold. Consider this: In CY 2007 till date, the total amount of capital raised from the primary market has reached a whopping Rs 12, 041.68 crore. But June 2007 will be remembered for witnessing India Inc's largest fund-raising exercise ever. Of the total Rs 12,041.68 crore raised till June 20, nearly Rs 10,000 crore has been raised in June alone.
A couple of issues are lined up to hit the street, where more than Rs 13,000 crore will be mobilised from the primary market in June alone. This will take the total resource mobilisation in June 2007 to more than Rs 25,000 crore. Also, nearly 17 issues which has got approval from the Securities and Exchange Board of India (SEBI) will shortly hit the market whose total fund-raising plans are around Rs 7,400 crore.

Says Girish Nadkarni, COO-Institutional Banking & Institutional Equity, IL&FS Investmart: "The Indian IPO market has become really strong with variety of companies from different sectors approaching the primary market for raising capital. There is a huge potential in the Indian IPO market and the total capital raising activities in 2007 will surpass all previous figures. Liquidity in the Indian market has never been a major issue as most of the money has been coming from institutions." In CY07, it is not the number of issues that mattered the most, but the sheer size of each issue, which grabbed the headlines. Market players expressed a lot of concern about these mega issues, which could potentially suck out the available liquidity in the market. But to everybody's surprise, these mega issues did not have any negative consequences on other activities of the capital market.

Shrugging off liquidity concerns, mega issues of DLF Ltd and ICICI Bank's follow-on public offer (FPO), which is currently on, received good response from various categories of investors.

The Indian market has proved it several times that those issues, which are well priced, were able to successfully sail through, receiving good response from all categories of investors compared to those issues, which were overpriced. Market experts say size doesn't matter but the quality of the company and pricing decide the success of any IPO.

According to Arun Kejriwal, director, KRIS Capital: "The expectation of investors on post listing is a key factor for the success of any IPO. If the issue is well priced and investors think that they can make money post listing, those issues have received good response from investors."

Citing the example of ICICI Bank, Kejriwal says, "The ICICI Bank FPO is the single largest issue by any company in India. Still, it received good response from investors on the first day of subscription. But at the same time if we take the example of Cairn India, it got poor response from investors, which was considered overpriced."

Most of the issues in CY07 generated more response from the qualified institutional buyers (QIB) category, which one could easily argue is because 50% of the total issue size is reserved for them. But if we carefully see the figures, with special focus to oversubscription in this category in each IPO, one fact which is proved beyond doubt is the confidence reposed by foreign investors on the long-term India growth story. But on the other side it also reveals the stark reality of the hegemony enjoyed by these institutional fund houses over the Indian market.

Source: The Financial Express

Are you interested in Equity Market? Check-out Saturday watch on Market Outlook
Want to know market? http://knowmarket.blogspot.com/

Camels in the desert ...One of the best pictures of the year!!

Watch it closely and you'll get what is so great about this pic.

Thanks to: Bhargavendra Tripathi

ICICI played mindful and tricky game in pricing its FPO

As I was pretty tired yesterday evening, I didn't get a chance to go through business pages, which is unusual, but sometimes it happens. Being an auxiliary activity for me since last two years now, equity market has become a very real part of my daily life. It so happens that in late evening a friend of mine conveyed me that ICICI has declared its price-band and its 885-950. My first reaction was "oh my God its another DLF, it has put an aggressive price as well". But as I started going through its RHP and other news, I realized it's mindful and tricky too!

Huge money is involved in market, talented minds too… Institutional buyers are getting smart and the firms smarter…

Well, for all those who are wondering what I am talking about, read this, where I've put whole saga about ICICI FPO in financial and technical terms.

If you have even niggling idea about equity market and how it goes, you must be knowing, its more unpredictable than a cricket match where India plays and much more vulnerable than wendy house made in sand-heap at sea-sore and much more filled with floating information than any page of well known matrimonial site.

When you go finding about ICICI FPO in news, amid all brouhaha, you'll be left confused. I am trying to make a point here.

Somebody said to me once, if you have to find how rich a person is, don't look for his branded cloth, watch, perfume or tie; instead look for his shoes… the idea is very clear, if you have to find how a firms fundamentals are, don't look for those orbits where everyone is managing beautifully, but look for how it is performing where others concentrate very little. Look how fundamentally strong a company is where others don't care…

When it comes to ICICI, I read somewhere its Hinterland to foreign soil, and it certainly is.

With a strong franchise, the parent bank has its growth drivers firmly in place. Offering a wide range of products from credit card to mortgages, the bank is a clear market leader in the retail segment, which constitutes about 65 per cent of its loans.

While the retail market has grown in the range of 30-40 per cent over the last three years, ICICI Bank has consistently beaten the industry with a 60 per cent growth each in 2004-05 and 2005-06, and 39 per cent in the last fiscal, a slowdown mainly due to fluctuation in interest rates.

The retail market is expected to grow at 20-25 per cent in next few years and going by the past track record ICICI Bank should outpace the industry growth rate. Brushing aside the rising interest rate impact on loans, Kalpana Morparia, joint managing director, ICICI Bank, said that the bank expects to grow its retail business profitably.

After making its presence felt in the urban retail segment, the bank is turning to opportunities in the rural sector. Though the urban retail segment will continue to be the bank's growth engine, ICICI Bank wants to reach the consumers in the hinterland, not serviced by banks currently.

"We feel that if properly serviced, rural areas can offer greater opportunities than even retail," says Mulye. To grab this opportunity, the bank has formed a multi-product and multi-channel strategy primarily by partnering with various micro-finance organisation, self-help groups and even corporate targeting the retail as well the SME customers.

Also, looking at the big volumes of cross border M&As, growing aspiration of Indian companies to have a global size and to meet the needs of the NRI population, the company is looking forward to enhance its international presence. Currently, the bank has the largest international business among Indian banks with presence in 18 countries outside India.

Currently, this forms 19 per cent of its total consolidated balance sheet. Going forward, the bank will also focus on the international retail i.e. fees and liability (deposits) generation business. It already has a 25 per cent market share in inward remittance market of $28-30 billion.

In total, banks shoes are firm and robust and certainly a branded one.

There is real good scope for good medium/long-term returns, given the prospects for the core banking business, strong brand value and possible contributions from the insurance subsidiary. Moreover ICICI strategically has provided Rs. 50 discount to lure retailers, which certainly is a plus point and it diminishes downside risk to a large extent. Unlike Vishal retail, here the scenario of having " too good a news is a bad news" can be ruled out, as its huge issue size won't let it oversubscribed in double digit in any case in Retail section.

Having said all that, one cannot expect it to grow overnight, may be in adverse situation its price may come below issue price in short term, but when it comes to medium to long term story, its only win situation. Be there, and remain firm for a longer period. You'll get reward.

The bank was expected to be mindful in its pricing strategy of the fact it is following close on the heels of one of India's largest initial public offerings last week. DLF, the property group, raised $2.25 billion. Yet the deal is still far behind the benchmarks set by China. Industrial and Commercial Bank of China, China's largest bank, raised $19 billion last year. That tells how far Indian equity market has to go to mature globally.

Also read ICICI meant for medium to long term investor.

Are you interested in Equity Market? Check-out Saturday watch on Market Outlook
Want to know market? http://knowmarket.blogspot.com/

TCS: First Mover In India - CEO speaks to Forbes.com

To what extent and for how long will you and the industry be able to weather the impact of the rising rupee [which has appreciated over 8% against the dollar since January]? What do you expect from the government on that front?
The rupee's appreciation vis-à-vis the dollar is definitely of concern to the industry and TCS. Hedging is a mechanism by which you cover your losses. We've done that fairly well in the last quarter. But because of the mechanism and costs involved, we can only go to a certain point. So anything below 43 rupees vs. the dollar will continue to worry us.
To what extent the government will succeed in the short term in addressing inflation will determine how the rupee's rise will play out. The industry has expressed its views on a number of policies, and we've said what interventions are possible from our perspective.

TCS has a huge workforce, to which you're adding substantially every quarter. What percentage is global and how much is that going to expand in the next few years?
We have a network model where we deliver from multiple global locations, including Uruguay, Chile, Mexico and China. It's becoming a scale play even outside the country. At present, 9.6% of our employees are from other nationalities; it'll grow to 10.5% in two years.

We're hearing so much about the talent crunch today. What are you doing to attract and, more important, retain employees in India? How much is the fight for talent contributing to rising costs per employee?
The war for talent will only get tougher. [In India] the demand is not from IT alone--there are also industries like retail, financial services, banking. The brand which TCS has built has some attraction for young graduates. The number of colleges we go to in India alone each year just crossed 300. We've been successful in ensuring we get invited [to campuses] early in the game. We also engage students through summer projects, training and have strong ties with the faculty. We have centers of excellence on campuses, fund projects there.
Having gotten people from campuses, the second level is the quality of work, what kinds of opportunities they have. We have a dedicated [two-month] training program for all new employees. Experienced professionals have two-week trainings every year. Our attrition rates are 11.3%, way below the industry average. We trained 32,000 professionals last year.

What are your favorite global locations for TCS centers? Why?
North America tops the list because of its proximity to our customers. Another favorite is Uruguay, from where we are able to address European and North American requirements and cater to companies that need Spanish capabilities support. Canada is another asset.
In China, we can address the domestic as well as Asia-Pacific market. Countries in Eastern Europe and Africa help us to identify talent and draw professionals. They want us to employ their graduates. And in India, tier-two cities are definite destinations of the future.

There's growing interest from global firms in setting up captive centers in India. For how long will our infrastructure and talent pool be able to sustain that?
This will be one of the mechanisms global corporations will adopt for their own strategic reasons. They see India as a good destination, but the size of such centers will not exceed a couple of thousand employees. And some global majors also exit these centers after a certain period of time. Some will never have captives. Most companies realize their main brief is to run their business rather than run their IT capabilities. The bigger portion [of their technology needs] will always be outsourced.

What keeps TCS ahead of the competition? What do you do that makes the firm unique?
The experience of the last 38 years is a very clear and powerful differentiator. We're present across geographies. We do strong deployment of capabilities in the domestic market, where 12% of our revenue comes from. Our ability to handle large turnkey, total-responsibility projects is also a very important differentiator. Another factor is, we've integrated our global workforce and reached out to markets that are far beyond traditional non-English-speaking markets. We did it successfully in Uruguay and China. We're a global player with a global presence.

How will a reduction in discretionary spending in the U.S. affect TCS and the industry as a whole? Is a global slowdown good for Indian tech growth?
When discretionary spending gets reduced, that plays out well to our strategy and the India strategy, because of our ability to take costs out through process improvements and by shifting from high-cost to low-cost locations. We provide value-added, low-cost arbitrage for firms. The ability to ramp up in offshore locations rapidly is a dimension we bring in.
But I don't see any such indication of a slowdown in spending as we speak. About 18% of our revenues last year came from new services that we launched.

Opponents of an increase in the H1-B visa cap argue that since Indian firms file the highest number of those applications for visiting Indian professionals, the program isn't really being used to retain talent. Is that a fair argument?
To us, whether the number of visas gets increased or decreased or stays the same, we look at our business model differently, where we should not be dependent on just the movement of people from here to there. How do you localize, globalize, how do you hire the locals as well as distribute the workforce, not just in the U.S. alone. We view this in totality. We don't make recommendations saying, "Increase the number of H1-Bs...we're having problems."
Our whole view is the mobility of employees, and the ability to execute projects in any part of the world, is going to be critical for any global company, whether you go for one year or a couple of weeks. The same is for whether a U.S. company needs access into India or any other country. That's the way we need to look at this, rather than as a U.S. "visa situation."

Are you interested in Equity Market? Check-out Saturday watch on Market Outlook
Want to know market? http://knowmarket.blogspot.com/