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India Inc looks to raise over Rs 72,000 crore from IPO market

After successfully raising over Rs 40,000 crore in the calendar year so far, India Inc is looking to raise more than Rs 72,000 crore from initial public offerings (IPO) in the coming months.

As on November 10, 2023, 26 companies have received the market regulator’s nod for IPOs and the approval still remains valid. These companies are estimated to raise up to Rs 29,000 crore. Besides, 39 companies have filed offer documents with the Securities and Exchange Board of India and are awaiting clearance. These companies are looking to raise over Rs 43,000 crore, as per data from Prime Database.

“The IPO market has been quite good in the last one year. We have seen more than three-fourth of the IPO’s witnessing listing gains. The market is quite hot,” said Jayesh Bhanushali, Lead (Research), IIFL Securities.

Analysts believe one of the reasons for higher subscription for these IPOs is a good valuation offered by the companies to retail investors. Companies were known to overprice their IPOs till last year. “Compared to last year, companies have changed their strategy and now they are offering good valuation to retail investors and HNIs (high net individuals),” said an analyst.

The week ending November 24 was one of the busiest weeks for the primary market in recent years as five mainboard IPOs of Flair Writing, Fedbank Financial Services, Gandhar Oil Refinery India, Tata Technologies and IREDA opened to raise Rs 7,377 crore. “The huge appetite for equities stems from the confidence that investors have in the India growth story and the large universe of fast-growing, well-managed companies, which are expected to deliver good profits,” said Mahavir Lunawat, Managing Director, Pantomath Capital Advisors.

SEBI has announced a reduction in the timeline for listing shares on stock exchanges after the closure of IPOs. The regulation has cut the listing time frame from T+6 to T+3. “The reduced timeline means that investor money would be blocked for a shorter duration of time. Investors now have the opportunity for having early credit and liquidity for their investment, which enable investors to analyse and participate in more IPOs… as we gear for bigger capital formation,” Lunawat said.

Nearly 300 companies have debuted on the bourses in the last ten years up to FY23. All this has been possible because of the fast-growing and deepening secondary market where the daily average turnover in the cash segment is now about Rs 65,000 crore.

With as many as 65 companies queueing up with their IPO plans, the coming months would be crucial for the IPO market which witnessed a boom in 2021. In such a scenario, investors need to be careful while investing in them.

IPO is an asset class that is a derivative of the secondary market. If the secondary markets are strong, the investor sentiments are high and in such a scenario IPOs tend to receive a lot of investor interest and generally fare well. However, that is not true for all cases and hence investors need to do a thorough study of the company — the quality of promoters, business fundamentals, and the financial and peer review analysis — before investing in an IPO. Corporate governance practices in the company should be given the top priority.

A good peer review is a must: Investors must study other listed companies in the sector and compare their growth, and also compare their PE ratio (market price to earnings per share). If the company coming with its IPO is demanding a higher valuation, investors can choose to skip the issue.

If the stock markets remained buoyant over the last 11 months and the global and domestic liquidity conditions helped the secondary and primary markets, the equity markets are expected to remain volatile in the near future on various accounts. While global inflation concerns and withdrawal of global liquidity and rise in bond yields and interest rates is something that will keep the money flow into equities in check, the geo-political tensions and rising crude oil prices will also keep equity markets under pressure.

“In such a scenario, the forthcoming issues may or may not receive the kind of interest that was received by the ones that came over the last 11-months, on an average. While that may limit listing gains, investors can go for companies that have a formidable business model and future growth potential,” said an analyst. A relatively weaker equity market would also mean that promoters and merchant bankers may not be able to command a substantial premium and the issues may be more reasonably priced, which is good for the investors.

by Hitesh Vyas , George Mathew

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