Lanka should catch up with global IPO trend

Channa Kasturisinghe

BOURSE: The Colombo Stock Exchange (CSE) has felt the need to create awareness among companies on the benefits of being listed on the stock market in the backdrop of growing trend of Initial Public Offerings worldwide.

Although the IPO of Vallibel Power Erathna Ltd. launched yesterday successfully oversubscribed, the fact that it was only the first IPO for 2006 is a clear indication that Sri Lanka has not caught up with the global trend.

Director General of the CSE Hiran Mendis told the Daily News that the CSE is urging companies to enter the market as it could benefit the companies as well as the CSE.

"An IPO can increase the value and the stature of a company tremendously. For example Dialog issued shares of one rupee par value at Rs. 12 and now the share is traded around Rs. 20. On the other hand it brought more liquidity to the stock market which is good for the market," Mendis said.

A spokesman from Ernst and Young Colombo office told the Daily News that it is very important that IPOs take place regularly as it creates interest among the public. "Every new IPO brings new investors to the market.

Through an IPO, more value is created as far as investors are concerned, too. It is also important because there is a growing trend of IPO's worldwide.

Meanwhile Ernst and Young which released the third annual Global IPO Report last week said that 29 countries including India hosted more than US$ 1 billion worth of IPOs last year, making a globalisation trend set to continue through 2006.

"A wide global spread of IPO activity, a mix of types of offering - both privatisation and new ventures, energetic growth in emerging markets, and vigorous competition for new business by the world's stock exchanges all bode well for the IPO supply in 2006," the report said.

It also said that India has evoked lively investor interest will continue to do so. "Many Indian IPOs have been oversubscribed 20 to 30 times in markets that have been scaling record levels.

Following Jet Airways' successful launch - one of the most successful Indian IPOs of recent times - a number of State-run airlines are poised to float in the near future," the report said.