Confidence builds on Indian equities

There is a positive feeling surrounding the Indian equities market as new Initial Public Offerings (IPOs) in the last fiscal year (which ended in March) totaled R214.32 billion, up from R178.21 billion the previous year, and only R10.39 billion the year before that. IPOs this year could be up to as much as R400 billion.

This positive feeling is somewhat subdued, however, by falling prices and uncertainty about how to attract more investors to the market. Only 1.5 percent of the $1,500 billion in household savings is invested in equities. This is very low compared to other Asian markets.

One thing holding small investors back from entering the market is the requirement, which does not apply to large investors, that they make a full down payment for their purchases.

Another problem in the Indian market is that of attracting smaller companies to list on the market. A huge factor in preventing such companies from listing is the huge amount of time and effort required to meet disclosure requirements for the issue prospectus.

One family-owned retailer, for example, spent nine months gathering information on business differences within the family that occupied one-third of the 630-pages prospectus, information the company said had no bearing at all on the operation of the business.

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