Indian companies raised a record close to Rs 27,000 crore through initial public offerings in the first half of the current fiscal and an impressive pipeline is already in place for coming months. “Besides, over a dozen firms, including New India Assurance Company, Reliance Nippon Life Asset Management and HDFC Standard Life Insurance Company, have lined up their IPOs to raise funds totalling Rs 35,000 crore in coming months,” Dinesh Rohira, founder and CEO at 5nance.com, said.
Adding to the depth of the IPO market, companies from diverse sectors like insurance, healthcare, education, bank, cable TV and shipping have made their way to the IPO space during the period under review.
According to the latest data compiled from stock exchanges, 19 companies garnered over Rs 26,720 crore through their respective IPOs in April-September of the ongoing financial year, much higher than Rs 16,535 crore raised by 15 firms in the year-ago period. Prior to that, companies had raised a record Rs 21,244 crore from initial public offers (IPOs) in the first half of 2007-08.
Proceeds of the IPO were used to fund business expansion plans, pay debt, meet working capital requirements and for other general corporate purposes. “One of the big reasons why we are seeing so many IPOs hitting stock markets is the uplift in investor sentiment, which is also reflected in the returns that the Nifty gave in the first half of the year,” Rohira added.
“Further, Sebi’s proactive regulations and (Narendra) Modi-led government’s pro-business policies have helped both companies and investors shrug off fears and lap up opportunities to become part of the India growth story,” he noted.
Making a similar point, Bajaj Capital CEO Rahul Parikh said: “The underlying bullish sentiment in the markets and consequent high demand from domestic investors means that companies can get a good price for their issues. Also, there is a need to deleverage balancesheets.”
He added: “Time is also ripe for institutional investors like private equity to exit at a good price as prevailing valuations in secondary markets are high.”
Market watchdog Sebi has taken numerous steps that have encouraged companies to sell shares. One key enabler is making Asba (Application Supported by Blocked Amount) mandatory for all investors, including retail. Also, Sebi’s proactive approach to the market has calmed investors’ nerves on frauds.
By taking the IPO route, the companies achieve benefits of listing as well as enhance their brand name and provide liquidity to the existing shareholders.
Moreover, IPOs like Avenue Supermarts — which runs retail chain D-mart — and CDSL clocking more than 200 per cent returns since listing have bolstered investors’ faith to clock handsome gains.
The IPO chart in the first half of the current fiscal was led by SBI Life Insurance (Rs 8,400 crore), followed by ICICI Lombard General Insurance (5,700 crore), AU Small Finance Bank (Rs 1,912 crore), Eris Lifesciences (Rs 1,741 crore), Cochin Shipyard (Rs 1,468 crore) and Housing and Urban Development Corporation (Rs 1,224 crore).