India marks 60th anniversary with booming markets Financial News, USA, August 24, 2007: The timing of India’s celebration last week of its 60th anniversary of independence from Britain could not have been more auspicious. Indian equity capital markets rallied and the country is tipped to be the next economic superpower by 2020. With a gross domestic product of 10% and a rupee appreciation of 7% this year, analysts say India’s star is rising. Over the past five years, the Bombay stock exchange index has climbed 431% from 3181.23 in August 2002 to 15,000.91 last week. By comparison, China experienced a 172% rise, while the US and UK moved up 60% in the same period. With sub-prime problems haunting most of the world’s developed markets, India, which relies less than Brazil, Russia and China on the US and Europe, appears breezy by comparison. This year’s equity capital markets volume has soared to a record $17.6bn (€13bn). Its initial public offering market has outshone previous year’s totals and is worth more than $6bn, according to data provider Thomson Financial. This growth has lured foreign investors, who placed $15bn in foreign direct investments and spent a further $12bn on portfolio investments in the first half, swelling the country’s foreign exchange reserves to $200bn. Last month, Indian real estate group DLF launched the country’s largest flotation, led by Kotak Mahindra and Merrill Lynch as bookrunners, with Citi, Deutsche Bank, ICICI, Lehman Brothers, UBS and SBI Capital Markets acting as joint managers. The €2.3bn IPO was three times oversubscribed and the shares leaped 11% on debut, proving wrong property skeptics, who predicted low interest in them. Pankaj Vaish, Lehman Brothers’ head of India equity and fixed income for liquid markets, said: "Investors are coming to India for the long run. The country has a stable and secure market and has made impressive gains over the past few years. "The fundamentals are good and it is only recently that the equity market has been properly discovered there, so there is great potential. The IPO pipeline is healthy and local investors do not seem too phased by recent market turmoil. The market could even benefit from a pull back to further establish it as mature and digest the recent gains it has made." One analyst said Indian equity markets have just started to grow and will blossom within in a few years. Indian equity underwriting fees have doubled this year to $12.5bn on the same period last year, while the value of mergers and acquisitions has more than tripled from $15.6bn to $49.3bn, according to Bloomberg. Banks are clamoring for Indian listings and this year Merrill Lynch took the crown for Indian IPO mandates. India’s Tata Steel this month raised $875m in a foreign convertible offering to help finance its $12bn acquisition of Anglo-Dutch rival Corus, consolidating India’s dominance of Asia’s convertible bond market for the third year in a row. The Tata deal has boosted this year’s proceeds to $5.4bn, outstripping last year’s $4bn total. The performance makes India Asia’s leading issuer of foreign currency convertible bonds since 2005, according to Barclays Capital analysts. The foreign currency convertibles are the region’s leading convertible structure. Banks are piling into the country to build offices or improve existing businesses. Lehman Brothers last week became the latest bank to buy a domestic brokerage when it acquired the institutional equities business of Bric Securities for $70.4m. Tarun Jotwani, Lehman Brothers India chairman and chief executive, said: "Lehman Brothers has grown its presence in India considerably over the past year and this transaction underscores our commitment to building a strong franchise here. India’s economic growth and the increasing depth and breadth of its capital markets present a strong business opportunity." Several brokerages have acquired strategic interest in Indian equivalents. Morgan Stanley bought out its Indian joint venture partner JM Financial in February for $425m, valuing its shares at 54 times last year’s earnings. Merrill Lynch paid $500m to acquire stake in DSP Merrill Lynch in December 2005 and Goldman Sachs ended a decade-old relationship with billionaire Uday Kotak last year to acquire a brokerage at some point. Back