By Nick Edser BBC News Online business reporter

After a grim few months for shares on the London Stock Exchange (LSE), there are signs that companies are once again starting to look to the market as a way of raising money.

Since the dot.com boom and bust, there has been a marked lack of high profile share offerings, with companies unwilling to come to the market in such volatile conditions, and investors wary of buying shares.

But the past couple of months have seen both HMV Music and the Punch Taverns pub group floated on the LSE.

Meanwhile the bookmakers William Hill, the international fashion brand Burberry, and the business directory Yell are also heading for an initial public offering (IPO) in London.

However, experts are warning that only the strongest firms will succeed in floating in the current market.

Floating or sinking?

As the tech boom raged, more than �3.4bn was raised in new share issues on the London Stock Exchange during the 1999/2000 financial year, with �700m of this coming from listings on the Alternative Investment Market (AIM).

But last year the total had fallen to �1.9bn, with only �93.6m being raised on AIM.

The highest profile flotations this year have also had a difficult time of it.

Since floating at a price of 192 pence per share in May, HMV's shares have lost about 15% of their value.

And Punch Taverns' float was initially cancelled, before finally going ahead at a lower price.

On the way back

Despite these problems there have been some smoother, if lower key, flotations this year.

Companies floating now must be able to withstand the full glare of the investor and media spotlight

Jeremy Batstone, NatWest Stockbrokers

The oil services firm Wood Group made an impressive debut on the market last week, with the issue reportedly seven or eight times oversubscribed.

And the previous week, Intertek - a company which tests products such as textiles, toys and chemicals - also launched successfully on the market.

With William Hill, Burberry and Yell now all heading for the market, a mood of cautious optimism appears to be emerging.

"Lately, the IPO market has been looking more upbeat and we have seen some positive indications coming from the market," says Tim Ward at the London Stock Exchange.

"However, we know from experience that IPOs are not definite until they actually happen, so we're not predicting an upturn just yet."

Quality the key

Neil Austin, head of new issues at KPMG Corporate Finance is more positive when it comes to the question of whether the IPO market is recovering.

Shares in HMV made a disappointing debut on the market

"Yes it is," he says.

"There is a good quality pipeline of companies coming through."

But he added that the sort of companies being floated at the moment are a world away from the type of firm which floated at the height of the tech boom.

Profits and cash generation are now prized far more highly than a quirky name and a dot.com suffix.

"Clearly what investors are looking for is a realistic price, a good quality management team, and a business which is in a sector with decent growth prospects," Mr Austin says.

Waiting game

The theme of quality and profits is echoed by all analysts.

Hilary Cook, director of investment strategy at Barclays Private Clients, says she thinks there is a lot of money ready to be invested - but only in the right firms.

"There is a lot of liquidity available, institutions are sitting on a lot of cash," she says.

But many firms still remain nervous about coming to the market in the current climate, she adds.

Under the microscope

Not all analysts are so positive about the state of the market.

"It's too early to say that the market is showing recovery," says Jeremy Batstone, head of research at NatWest Stockbrokers.

And given that demand for shares is so light at the moment, he says, a wave of new issues is the last thing the market needs.

Once again, he thinks quality is the key for a successful float.

"It's probably only the most robust businesses that will get away (i.e. be floated)," he says.

And he adds it is the old-fashioned, cash generating businesses like Punch's pubs and William Hill's betting shops that appeal to investors in tough times.

"The kind of companies we saw being floated a couple of years ago were nothing like strong enough to survive a change in market conditions."

"Companies floating now must be able to withstand the full glare of the investor and media spotlight."