More than Rs 31 billion has been raised through 10 Initial Public Offerings (IPOs) and 38 Rights Issues (RIs) since the war ended in May 2009 with analysts saying the Colombo bourse is set to witness more such investment next year which will broaden its depth but also witness a liquidity mop in the market, albeit temporary.
Deshan Pushparajah, Manager Corporate Affairs Capital Alliance told the Business Times that with attractiveness of the Sri Lankan environment, the capital markets of the country is set to grow in leaps and bounds.
“It will grow not in terms of returns but in terms of its depth,” he said, adding that IPOs and RIs will occur more frequently over the next 12 months as businesses seek to expand and come to the capital market as the preferred source of cash.
This year alone Rs 4.3 billion was raised through IPOs while last year it was Rs 1.7 billion. There were 13 RIs in 2009 which raised Rs 5.2 billion while this year saw RIs raising some Rs 20.2 billion.
Analysts said that RI and IPOs have mopped up liquidity in the market but this is not the main reason for its fall during the past two months.
“Many newcomers (investors) come into the market whenever an IPO comes into the market. The net effect of an IPO is a positive one in the long run for the bourse. So the RIs and IPOs seen during this year have not made much of an impact in terms of squeezing the market liquidity,” Sarath Rajapakse, Director, Capital Trust told the Business Times.
Mr. Pushparajah pointed out that with IPOs and RIs the depth (market cap) and width (number of listed counters) will increase significantly enabling a healthier capital market with funds being well distributed. The market cap swelled by more than Rs 1.6 trillion since the war ended from a ‘mere’ Rs 527.4 billion in May 18, 2009 and stood at Rs 2.2 trillion (as at Friday).
He added that with all the ‘hot’ money out there, firms would be wise to actually make use of their overvalued shares to raise money cheaply. “This envisioned increase in the size of the markets should assist in reducing the current problem of ‘too much money chasing after too few shares," he said.
State entities will also be jumping into the increasingly, popular IPO cash-raising bandwagon next year, bringing in some ‘biggies’ into the market, such as Sri Lankan Catering, Sri Lanka Insurance Corporation, etc which will see a surge in the market capitalisation, analysts said. |
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