Bharti Infratel issue may help revive IPO loan biz
According to industry observers, the two IPOs — especially that of Bharti Infratel — have evinced significant interest from rich investors and the NBFCs are advising clients to keep their loan books ready for the upcoming IPOs.
“There is a decent appetite for these issues,” said Ambareesh Baliga, an independent analyst. According to market participants, the demand for IPO financing depends on the valuation and quality of the issues involved.
Crisil has assigned an IPO Grade of 4/5 to the Bharti Infratel IPO, whose issue size is around R4,500 crore.
The grading indicates that the fundamentals of the IPO are ‘above average’ relative to the other listed equity securities in India. Brokerages have also recommended investing in Care, owing to its high margins and lower price-to-earnings multiple than it listed peers, Crisil and Icra.
High net-worth individuals (HNIs) borrow for a short term to punt in the market, typically 10-15 days from the last day of the issue. The interest rates currently quoted for these loans is 14-15%.
IPO loans are typically availed by those who are confident that the company will list at a significant premium, which will give them the leeway to exit the stock soon after it is listed.
“IPO financing works only if the financiers are convinced that the IPO will be subscribed at least five times. Else, there is a possibility that they could lose
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