A hectic fundraiser is expected via initial public offerings (IPOs) in October-November, with at least 30 companies collectively seeking to raise more than 45 billion rupees through initial share sales, banking sources said. commercial. Of the total fundraising, a large part would be obtained by technology-driven companies.
The successful IPO of food delivery company Zomato, which was overwhelmingly underwritten more than 38 times, encouraged new-age tech companies to go out with their top selling shares. Historically, companies like Zomato have raised funds from private equity players, and the IPO has opened up a new source of funding for new-age tech companies, said Jyoti Roy, Angel One’s assistant vice president (equity strategist).
Companies expected to raise funds through their IPOs during October-November include Policybazaar (Rs 6,017 crore), Emcure Pharmaceuticals (Rs 4,500 crore) Nykaa (Rs 4,000 crore), CMS Info Systems (Rs 2,000 crore), MobiKwik Systems (Rs 1,900 crore), said the commercial banking sources. Also, Northern Arc Capital (Rs 1,800 crore), Ixigo (Rs 1,600 crore), Sapphire Foods (Rs 1,500 crore), Fincare Small Finance Bank (Rs 1,330 crore), Sterlite Power (Rs 1,250 crore) RateGain Travel Technologies (Rs 1,200 crore) ) crore) and Supriya Lifescience (Rs 1,200 crore) may float their IPOs during the period under review, they added.
Angel One’s Roy attributed the impressive IPO in the next month to several factors, including a stronger-than-expected recovery in the economy after the second wave, continued FPIs and domestic flows into the markets, and an increase in retail share. in the stock market. in the last year. Moving forward, the IPO boom is expected to extend into next year if the prevailing market situation remains constant or does not change much, said Kaushlendra Singh Sengar, founder and CEO of INVEST19.
Making a similar statement, Nikhil Kamath, co-founder of True Beacon and Zerodha, said that if the bull run continues for the next 1-2 years, the IPO run will continue. Furthermore, the technology sector is expected to remain one of the main drivers of the market. So far in 2021, up to 40 companies have launched their IPOs to raise Rs 64,217 crore. Additionally, Aditya Birla Sun Life AMC will launch its initial share sale of Rs 2,778 crore on September 29.
In addition to these, PowerGrid InvIT, the infrastructure investment trust (InvIT) sponsored by Power Grid Corporation of India, collected Rs 7,735 crore through its IPO, and Brookfield India Real Estate Trust raised Rs 3,800 crore through its initial sale. of actions. This was much higher than the 26,611 crore raised by 15 companies through initial share sales in all of 2020.
Such an impressive fundraising via IPO was last seen in 2017, when companies mobilized Rs 67,147 crore through 36 initial share sales. According to Kamath, IPOs are highly dependent on market cycles and the exuberance of IPOs that has been witnessed in the last 18 months is a function of the current bull cycle. Companies seek to take advantage of investor sentiments.
“The market is hitting new highs and the strong response we see in the primary market is pushing the companies that were sitting on the billboards to come and take advantage of the buoyant market,” said Vikas Singhania, CEO of TradeSmart. Additionally, he said companies are raising money for growth capital or inorganic growth opportunities in the future.
Many of the IPOs are an offer to sell (OFS), where the private equity players or the promoter want to withdraw part of their participation. “Today, the entire IPO process attracts a lot of attention for companies that act as an indirect promotion,” Kamath said.
Initial share sales are receiving huge requests from investors and IPOs have been underwritten multiple times. This has pushed companies to raise funds through IPOs. Initial share sales of nearly a dozen companies, including Paras Defense and Space Technologies, MTAR Technologies, Easy Trip Planners, Devyani International, Rolex Rings, Tatva Chintan Pharma Chem, and Nazara Technologies, were subscribed more than 100 times.
Interestingly, during the current calendar year, most IPOs were opened at a premium over the issue price, suggesting a strong appetite on the part of investors. Laxmi Organic Industries, MTAR Technologies, Easy Trip Planners, GR Infraprojects, Clean Science and Technology, Macrotech Developers, and Ami Organics, which were listed this year, are trading above their issue price, providing smart returns in the 110 range. at 320 percent. from listing, to investors.
INVEST19’s Sengar said that with the current scenario of favorable interest rates coupled with high liquidity, financial institutions are offering IPO financing products at lower rates. Lower cost of financing will continue to support the IPO boom. Additionally, the PSU divestment will be a box office success to support the ongoing IPO boom. The listing of LIC is expected to occur in 2021-2022, which will be one of the largest IPOs in the history of the Indian market. This will help the current ongoing buoyancy in the IPO market by 2022, he added.
Earlier this month, Sebi Chairman Ajay Tyagi said that growth-oriented tech companies have raised 15 billion rupees through initial share sales in the past 18 months and that public offerings of shares worth around Rs 30 billion held by such companies. “The growing number of unicorns in the startup ecosystem is a testament to most new age tech companies in our economy. These companies often follow a unique business model that focuses more on rapid growth than on immediate profitability, “he said.