Printers see boom in business as IPO market revives

With a spurt in the number of initial public offerings (IPOs) in recent months and more issues lined up to hit the markets in the new year, it’s not just the merchant bankers who have seen a revival in business.

Printers are also smiling all the way to banks as more IPOs mean more prospectus and forms to print.

“There will be an uptrend in the printing industry for the next three-four months. As we derive 50% of our business from the public issue market, we expect revenues to grow 25-35% in the current financial year,” said Shailesh Vyas, senior vice-president at Mumbai-based Western Press Pvt Ltd.

According to Prime Database, Rs 21,542 crore was raised through 22 IPOs since April 2009 (FY10) as against just Rs 3,533 crore raised through the same number of issues in the previous financial year.

The earlier two financial years had also seen massive mop-ups. FY 2007 saw 93 issues raise Rs 25,288 crore and FY 2008 had 96 issues raising Rs 59,331 crore.

The new year (2010) seems likely to hold more cheer for printers. There are 18 public issues that have received approval from the Securities and Exchange Board of India to raise Rs 5,186 crore.
Further, there are major ones like Jindal Power, Reliance Infratel, Sahara Prime, Sterlite and follow on offers from NTPC and SAIL awaiting clearance.

“The IPO market will be good this year since there are a lot of PSU disinvestments lined up.

We could see an increase in revenue of up to 50%,” said Mahesh Jain vice-president at Orient Press Ltd.

Estimates from printers suggest that a Rs 100-crore issue can see 15-20 lakh application forms being printed, which cost Rs 3 each. An issue of Rs.400 crore would mean 50 lakh applications.

Further, depending on the issue size, the number of red herring prospectuses could vary from a few thousand to over 10,000. These cost Rs 50-60 for a 300-page copy.

The number of applications actually printed depends on the expected strike rate, or applications likely to be converted into subscriptions.

While it is generally estimated to be 2-3%, it changes depending on the merchant banker and the market conditions.

While a high profile merchant banker can be more assured of investor interest, less famous ones would have to print more forms to mop up the required amount. In a downturn, the strike rate reduces and hence the need to print more forms for those brave enough to come out with an issue.

When these issues will hit the market and whether they will see appetite from investors is still to be seen but one thing is clear, the printers would definitely be busy this year.