Fundraising through the initial public offering (IPO) route has hit an all-time high in 2017, a year that saw benchmark indices scale new highs. A total of Rs 65,923 crore was raised through 33 IPOs since January, data sourced from Prime Database revealed. The last time the primary markets witnessed such frenzied activity was in 2010, when 64 companies raised Rs 37,535 crore. While the number of issues have been fewer in 2017, so far, a handful of large offers have skewed the picture. “It has been an outstanding year for the IPO markets. It has been an equally good year for QIPs, which too surpassed funds raised in the previous years. We are confident that 2018 will be equally exciting for the IPO markets,” said V Jayasankar, senior executive director and head of equity capital markets, Kotak Investment Banking. Companies in the banking financial services and insurance (BFSI) segment formed the chunk of IPOs in 2017. About 76%, or Rs 50,519 crore, of the total Rs 65,923 crore raised in 2017 was by BFSI companies.
Five insurance IPOs constituted almost 66% of the total funds raised. General Insurance Corporation whose IPO was the biggest in 2017 raised Rs 11,256 crore. New India Assurance, whose issue came a few weeks after GIC’s, IPO raised Rs 9,585 crore. Jayasankar said a more diverse set of companies could come to the markets next year as many of the insurance companies have already been listed. Market participants said an abundance of liquidity in the market and the desire of private equity players to exit their holdings has generated high activity in the primary market. And this is borne out by the high share of Offer for Sale (OFS) issues this year. About 83%, or Rs 54,793 crore, has been raised through OFS in 2017. PE investors like Kedaara Capital, Madison India and Quantum either made partial or full exits through IPOs this year. “The markets are buoyant. There is a good appetite in the market for these issues and valuations are attractive for issuers to raise money,” said Girish Nadkarni, managing director of Motilal Oswal Investment Advisors.
Listing gains and returns by the newly-listed companies and the positive sentiment in the broader market are among the reasons attributed to the trend. Of the 33 companies that made their debut on the exchanges this year, 20 have listed at a premium. Avenue Supermarts, the owner of the D-Mart brand, listed at a whopping 102% above its issue price. This is the biggest listing day opening in 12 years after Nandan Exim, whose stock opened at 140% premium to its issue price of Rs 20 in June 2005. Consumer electronics manufacturer Dixon Technologies, listed at a premium of 54% and Prataap Snacks at a premium of 35%. Godrej Agrovert, which made its debut in October, listed at 33% above its issue price. The newly-listed companies have given good returns to investors. The BSE IPO index, a gauge of newly-listed companies, rose by 41% year to date, while the benchmark Sensex rose by a more tepid 23% during the same period. Market participants say the euphoria in primary markets is set to continue in the next year. “If there is continued appetite for investment in the secondary market, continued fund flow in mutual funds and FII interest, then IPOs will come to the market. There are a lot of companies waiting in the wings to complete their IPOs. So from a supply side standpoint, you will see a reasonable amount of supply of new IPOs. The question is whether demand will be sustained going forward,” said an investment banker on condition of anonymity.