Indian IPO

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Monday, April 17, 2006

Air Deccan IPO may hit markets in mid-May

Deccan Aviation has decided not to rope in any private equity investors for the present and plans to hit the market to raise approximately Rs 500-550 crore (Rs 5-5.5 billion), sometime in the second week of May, reports Business Standard.

The initial public offering, IPO, for 2.45 crore shares is likely to be priced in a band of Rs 200-250.

Two of the merchant bankers associated with the IPO, ABN Amro Rothschild and JP Morgan, may however, withdraw from it. The issue will now be lead managed by ICICI Securities, Enam and SBI Caps.

The reason for this, according to a senior company executive is that JP Morgan and ABN Amro have other commitments in May. However, should the IPO be delayed for any reason and hit the market only in June or July, these investment bankers may once again be part of the team.

While Deccan has been toying with the idea of a preferential allotment to private equity investors, even before the IPO, it was apparently taking too much time. The company needs to bring out the public issue before May 20; otherwise it will have to file a fresh prospectus with Sebi.

In fact Deccan was to bring the IPO in February, which got delayed because of a deal that the company was negotiating with Airbus. While ABN Amro and JP Morgan were comfortable with the public issue coming up in February-March, they now have other assignments.

However, sources say, the investment bankers were also not too comfortable with the pricing as indicated during the road shows overseas; they found it aggressive. At that time, the price being talked about was between Rs 300-325 per share.

The overseas investors have been a little wary of the aviation stocks because Jet Airways, which came out with its IPO in February last year, is currently trading below Rs 1,100.

However, the shortage of aviation stocks and the lower pricing should generate interest from both foreign and local investors, say merchant bankers.

Deccan Aviation incurred a net loss of Rs 19.5 crore (Rs 195 million) for the year-ended March 2005, on a net income of Rs 305.5 crore (Rs 3.05 billion). The loss for the six months ended September 2005, was Rs 72.5 crore (Rs 725 million), on a net income of Rs 328.86 crore (Rs 3.28 billion).

The issue will result in a dilution of 25% of the post-issue equity of Rs 98.18 crore (Rs 981.8 million) and the price band of Rs 200-250 would mean a market capitalisation of Rs 2,000-2,500 crore (Rs 20-25 billion). Jet, which trades at Rs 970 has a market capitalisation of Rs 8,378 crore (Rs 83.78 billion).


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