High liquidity and robust interest from investors helped companies raise nearly Rs 25,000 crore through initial share-sales this year so far and 2021 is expected to be equally strong for the IPO market, experts said.
Adding to the depth of the IPO market, companies from diverse sectors like pharma, telecommunication, IT and financial services have made their way to the IPO space during the period under review. According to an analysis of data available with the stock exchanges, 12 initial public offerings (IPOs) in 2020 so far raised around Rs 25,000 crore, significantly higher than Rs 12,362 crore mopped up through 16 initial share-sales in the entire 2019.
Prior to that, 24 companies had floated their IPOs in 2018 that raised Rs 30,959 crore.
In 2020 so far, close to Rs 25,000 crore has already been raised through IPOs and the figure could rise further as Burger King's Rs 810-crore initial share-sale is schedule to open on December 2.
Vinod Nair, head of research at Geojit Financial Services, attributed higher fund raising in this year compared to 2019 to high interest of corporates and retail investors for the primary market despite huge contraction in the economy. At the same time, companies opted for the IPO route to build war-chest during the uncertainties and to strengthen their balance sheet, he added.
The capital market activities saw a big bounce back since May with several large secondary market offerings hitting the market. This gave confidence to the market participants -- investors, issuers and bankers --about the latent appetite in the market, said Ajay Saraf, head of Investment Banking & Institutional Equities, at ICICI Securities.
The markets witnessed large rights issues as well as QIPs, block trades and follow-on public offer during May to August period. Post that since July, with the launch of Rossari Biotech''s initial share-sale, IPO floodgates have opened.
The IPO chart in 2020 was led by SBI Cards and Payment Services Limited that raised Rs 10,355 crore, followed by Gland Pharma (about Rs 6,480 crore), CAMS (Rs 2,240 crore) and UTI Asset Management Company (Rs 2,160 crore).
In addition, Rossari Biotech, Happiest Minds Technologies, Route Mobile, Chemcon Speciality Chemicals, Angel Broking, Equitas Small Finance Bank, Likhitha Infrastructure and Mazagon Dock Shipbuilders tapped the IPO route to raise funds.
Apart from these 12 companies, Mindspace Business Parks REIT raised Rs 4,500 crore through IPO in July.
Real Estate Investment Trust (REIT), a popular instrument globally, was introduced in India a few years ago aimed at attracting investment in the real estate sector by monetising rent-yielding assets. It helps unlock the massive value of real estate assets and enable retail participation. "Most of the IPOs come during surging market. Sharp recovery in the stock market after March along with higher listing of few IPOs is playing on the minds of investors," said Harshad Chetanwala, co-founder of MyWealthGrowth.com.
"It is probably more to do with market sentiments as investors are more open to investing when markets are rising," he added.
Interestingly, the year 2020 saw most of the IPOs opening with a premium over the issue price suggesting strong investors appetite.
In fact, IPOs like Route Mobile, Happiest Minds Technologies, Rossari Biotech and Gland Pharma clocked handsome gains ranging from 40-200 per cent since listing to investors.
According to Saraf, strong liquidity driven market led by huge FPI inflows of more than USD 10 billion since the start of the year and healthy domestic inflows of around USD 6 billion have sustained valuations in secondary markets and helped issuers achieve desired results in terms of demand and pricing.
Further, a slew of IPOs are expected to hit the markets in the coming months as several firms including Kalyan Jewellers, Mrs Bectors Food Specialities Ltd and RailTel Corporation of India Ltd have already received markets regulator Sebi''s approval to launch their public issues.
"We expect next year to be equally strong and are already seeing 8-10 IPOs across sectors looking to tap the January-March window," Saraf said.
Themes expected to emerge stronger for the IPO markets are consumption, lending businesses like NBFCs, housing finance companies, insurance, pharma, REITS, among others, he added.
According to Nair, good performance of the market, excellent quality of the companies in offer and high liquidity will induce retail investors to invest in IPOs.
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