Since January 2004, Rs 40,000 crore has been raised through public issues-more than the sum that was raised in the previous 10 years.

85% of the public issues have given positive returns so far.

Bigger and better companies are now tapping the market. The average issue size has shot up from Rs 9.7 crore in 1995 to Rs 763 crore now.

Given the overwhelming response, SEBI has raised small investors' quota.

Anyone who invested in the IPO of brokerage firm Indiabulls in September 2004 and is still holding the shares must be a very happy person. Happy and rich. In the eight months since the Indiabulls public issue, an investment of Rs 20,000 is now worth almost Rs 1 lakh. But Indiabulls' issue was small in size-Rs 52 crore. Therefore, the Rs 200 crore in wealth created by Indiabulls is dwarfed by the estimated Rs 2,200 crore created by the ONGC public issue or the Rs 2,000 crore created by the IPO of software giant TCS.

These are the best of times for the primary market in India-for the companies raising funds through public issue and for people investing in such issues. Between January 2004 and April 2005, close to Rs 40,000 crore was raised through public issues, of which Rs 10,000 crore has been raised since January 2005. As 25 per cent of all public issues is reserved for retail investors, it would be safe to assume that small investors invested Rs 10,000 crore in public issues since the beginning of last year. According to Prithvi Haldea, managing director of Prime Database, the money raised from the primary market in 2004 was equal to the funds mobilised in the past nine years. More than 80 per cent of the public issues listed since January 2004 have given positive returns so far.

PICTURE SPEAK

"The price discovery process is fairer and better than it used to be in the past." U.R. BHAT INVESTMENT ADVISER "There is a strong case for raising the quota for small investors." PRITHVI HALDEA MANAGING DIRECTOR, PRIME DATABASE

The best part about the IPO boom is not the unprecedented amounts that have been raised, but a series of changes that make the markets safer and better than ever before. In 1995, the last boom year, some 1,444 companies (compared to 34 in 2004) had raised Rs 13,887 crore from the market. That made for an average offer size of just Rs 9.7 crore in 1995-compared with the average offer size of Rs 763 crore made between January 2004 and April 2005. Fewer but bigger issues are better than lots of small issues. Many small unknown companies that took public money through IPOs in the mid-1990s subsequently vanished.

A large issue size also means better chances of allotment for the retail investor. More importantly, as investment adviser U.R. Bhat points out, "Today many well known companies with a good track record are tapping the market. That lowers the risk for small investors." Says Falguni Nayar, managing director of Kotak Institutional Sales: "The companies entering markets are here to stay after listing."

Pricing of issues too is fairer than before-another positive for the small investor. Book building, which has become the norm for price determination, prevents fly-by-night operators and allows retail investors to piggyback on the decisions taken by institutional investors who are better equipped to judge a company and its pricing.

With primary markets on a roll-Rs 65,000 crore worth of public issues are in the pipeline-many experts are wondering if small investors' participation in public issues should be increased. It's a tough call to take. Small investors are generally advised not to invest in the stockmarket directly since it is beyond their grasp to make the right sale and purchase decisions all the time. They should ideally enter the market through mutual funds.

Even in an IPO not every issue gives positive returns. Very few investors go through the fine print of the issue prospectus to understand the risks. They put their money into public offers just because everybody else is also doing so. This herd mentality has not gone unpunished. The share price of export firm Vishal Overseas is down 55 per cent to Rs 20 from its issue price of Rs 45. The share price of Sah Petroleum fell by over 30 per cent to about Rs 24 from its issue price of Rs 35.

But since small investors are allowed to invest in public issues-the massive oversubscription in the retail segment of public issues indicates the overwhelming interest of small investors-experts suggest an increase in the quota of retail investors in future public issues. Besides, as Debashis Ghoshal, vice-president, SBI Capital points out, in 2003-4, only 1.4 per cent of household savings were invested in shares and debentures-down from 23.3 per cent in 1991-2. Market regulator SEBI too wants more retail investment in IPOs. It has recently raised the cap of retail investment from Rs 50,000 to Rs 1 lakh and has increased the share of retail investors in a book building issue from 25 to 35 per cent. So 2005 could be another year of IPOs.

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