After a decent show so far in 2020 despite the pandemic, the initial public offer market is awaiting a bumper crop with more than 30 IPOs worth over Rs 30,000 crore lined up for the new year.
After a decent show so far in 2020 despite the pandemic, the initial public offer market is awaiting a bumper crop with more than 30 IPOs worth over Rs 30,000 crore lined up for the new year. The primary market has been good so far this year raising over Rs 25,000 crore. And the street is abuzz since the past few months with more issues being lined up. From a comparative reading, despite the pandemic driven lockdowns shaved off the second quarter fully and a part of the third quarter, this is still better than 2019 when 16 issues could mop up only Rs 12,362 crore as against 24 issues in 2018 which had raised Rs 30,959 crore, and that was a full 60 per cent lower than 2018.
Come 2021 IPO street, consumer companies are set to dominate the market with Kalyan Jewellers, Indigo Paints, Stove Kraft, Samhi Hotels, Apeejay Surrendra Park Hotels, Nureca, Mrs Bectors Food, and food delivery app unicorn Zomato are in the pipeline. And if the government walks its tall talk of taking the nation’s financial behemoth LIC public, then 2021 will be a record year for IPO that will probably be broken never, as LIC will command a valuation that will run into trillions of rupees.
And most of these issues are likely to hit the market in the first quarter of itself, thus helping end the current fiscal with a good show, say market watchers. The biggest among the IPO candidates is the Kerala-based jewellery major Kalyan Jewellers which has lined up a Rs 1,750-crore issue as well as Sequoia Capital-backed Indigo Paints which is set to raise about Rs 1,000 crore from the market.
According to market experts, the momentum is expected to continue in 2021 as a huge pipeline of issues is likely to hit to the market, which is awash with liquidity on one hand a buoyant secondary market on the other with the indices trading over life-time highs. The pandemic induced fear had seen a 35 per cent sellout in March alone. “I believe the IPO pipeline will continue to remain strong in 2021 as there are quality issues plenty in the line-up. Over the past three years, there have been many quality companies hitting the market and rewarding investors big way,” V Jayasankar, senior executive director and head of equity capital markets at Kotak Investment Banking, told PTI.
“While this year saw several financial services and industrial companies such as SBI Cards, UTI AMC and Gland Pharma tapping the market, lots of consumer focused companies are hitting the market next year,” he added. Several consumer-oriented companies, including Stove Kraft, Samhi Hotels, Apeejay Surrendra Park Hotels, Nureca, Mrs. Bectors Food and food delivery unicorn Zomato, have announced their IPO plans.
According to market watchers, the weight of consumer-oriented companies on the market cap is only about 8 per cent, which is relatively low if we compare other large markets. India being one of the fastest growing consumer economies, and given that many companies are growing in size and wanting to go public to raise capital, there is huge interest from both foreign and domestic investors for consumer-focussed firms, argued Jayasankar.
“The interest shown by investors in consumer-focused companies like Avenue Retail which runs the D-Mart branded retial chain, shows the pent-up demand for such shares,” he further said. Kalyan Jewellers, which has already received the Sebi nod for the IPO, could be the first to hit the market in 2021, merchant banking sources said. The estimated Rs 1,750-crore Kalyan issue would consist of a fresh equity issuance of Rs 1,000 crore and an offer for sale worth Rs 750 crore, according to the draft offer document.
The 2020 IPO market was dominated by financial services and industrials such as SBI Cards that raised Rs 10,355 crore in March, the Hyderabad-based pharma major Gland Pharma raising Rs 6,480 crore, CAMS mopping up Rs 2,240 crore and UTI Asset Management Company collecting Rs 2,160 crore from the much delayed issue. “This year the primary market has done well especially in the second half of the year on the back of a buoyant secondary market. This is also driven by strong liquidity conditions,” says Pranav Haldea, the managing director at Prime Database .
“I believe the IPO market will continue to remain buoyant in 2021, as there is a strong pipeline with over 30 companies bagging Sebi nod to raise over Rs 30,000 crore,” Haldea further said. Meanwhile, the ongoing IPO of city-based quick service restaurant chain Burger King India was fully subscribed within hours on the first day of bidding Wednesday and 1400 hrs on Thursday it was subscribed 5.6 times for its Rs 460-crore issue.