30 Enterprises May Launch Public Offerings In October-November To Raise Rs 45,000 Crore
Many IPOs are offers for sale (OFS), in which private equity investors or the promoter desire to sell a portion of their stake.
First public offers (IPOs) are expected to be busy in October and November, with at least 30 companies trying to earn over Rs 45,000 crore through initial share sales, according to merchant banking sources. Technology-driven enterprises would receive a big portion of the total financing. The successful IPO of food delivery firm Zomato, which was almost 38 times oversubscribed, inspired new-age Internet companies to issue primary stock offerings.
According to Jyoti Roy, deputy vice-president (equity strategist) of Angel One, companies like Zomato have traditionally raised capital from private equity players, and the IPO has opened up a new source of finance for new-age tech companies.
In addition, 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) 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 pipeline in the coming month to several factors, including a stronger-than-expected recovery in the economy after the second wave, continued FPIs and domestic flows in the markets and an increase in retail participation in the stock market in the past one year.
Going forward, the IPO boom is expected to extend in the coming year if the prevailing market situation remains constant or doesn't change much, Kaushlendra Singh Sengar, founder and CEO at INVEST19, said. Making a similar statement, Nikhil Kamath, co-founder of True Beacon and Zerodha, said if the bull run continues for the next 1-2 years, the IPO rush will continue. Moreover, the technology sector is expected to remain a major market driver. So far in 2021, 40 firms have issued initial public offerings, raising Rs 64,217 crore. On September 29, Aditya Birla Sun Life AMC will begin its Rs 2,778-crore initial public offering (IPO).
Aside from these, PowerGrid InvIT, the infrastructure investment trust (InvIT) sponsored by Power Grid Corporation of India, raised Rs 7,735 crore through its first public offering (IPO), and Brookfield India Real Estate Trust raised Rs 3,800 crore through its initial public offering (IPO). This was far more than the Rs 26,611 crore raised through initial share sales by 15 companies in the entire year of 2020.
The last time firms raised that much money through IPOs was in 2017, when they raised Rs 67,147 crore through 36 initial public offerings. According to Kamath, IPOs rely heavily on market cycles and the IPO exuberance that has been witnessed in the last 18 months is a function of the current bull cycle. Companies look to take advantage of investor sentiments.
"The market is touching new highs and the strong response that we see in the primary market is nudging companies who were sitting on the fences to come and take advantage of the buoyant market," Vikas Singhania, CEO of TradeSmart, said.
He, further, said that companies are raising money for growth capital or inorganic growth opportunities in the future. Many of the IPOs are an offer for sale (OFS), where private equity players or the promoter wants to cash out part of their holding. "Nowadays, the entire process of IPO garners a lot of attention for such companies that act as an indirect promotion," Kamath said.
Initial share sales are receiving tremendous applications from investors and IPOs have been subscribing multifold times. This has pushed companies to raise funds through IPO. 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, had their initial share offerings subscribed more than 100 times.
Surprisingly, most IPOs in the current calendar year opened at a premium over the issue price, indicating significant investor demand.
Laxmi Organic Industries, MTAR Technologies, Easy Trip Planners, GR Infraprojects, Clean Science and Technology, Macrotech Developers, and Ami Organics, all of which were listed this year, are currently trading above their issue price, providing investors with smart returns ranging from 110 to 320 percent since listing.
INVEST19's Sengar said that with the current favourable interest rate scenario along with high liquidity, financial institutions offer IPO funding products at lower rates. The lower cost of funding will continue to support the IPO boom. PSU disinvestment will also be a blockbuster, bolstering the existing IPO boom. LIC is projected to list in 2021-2022, making it one of the largest initial public offerings (IPOs) in Indian history. This will help maintain the current IPO market's buoyancy in 2022, he noted.
Growth-oriented technology companies have generated Rs 15,000 crore through initial share offerings in the previous 18 months, according to Sebi Chairman Ajay Tyagi, while IPOs worth approximately Rs 30,000 crore are in the pipeline. "The growing number of unicorns in the startup ecosystem is evidence of our economy's new-generation tech enterprises coming of age."These companies often follow a unique business model focusing more on rapid growth than immediate profitability," he had said.