IPO frenzy to continue in Oct-Nov, 30 firms look to mop up ₹45,000 cr

Hectic fundraising through initial public offerings (IPOs) is predicted in October-November, with a minimum of 30 companies are looking to collectively raise over ₹45,000 crore through initial share-sales, merchant banking sources said.

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Of the entire fundraising, an outsized chunk would be garnered by technology-driven companies.

The successful IPO of food delivery company Zomato, which was overwhelmingly subscribed by over 38 times, encouraged new-age tech companies to return out with their primary share-sales.

Historically, companies like Zomato have raised funds from private equity players and therefore the IPO has opened a replacement source of funding for new-age tech companies, Jyoti Roy, deputy vice-president (equity strategist) of Angel One, said.

The firms that are expected to boost funds through their IPOs during October-November include Policybazaar ( ₹6,017 crore), Emcure Pharmaceuticals ( ₹4,500 crore) Nykaa ( ₹4,000 crore), CMS Info Systems ( ₹2,000 crore), MobiKwik Systems ( ₹1,900 crore), the merchant banking sources said.

In addition, Northern Arc Capital ( ₹1,800 crore), Ixigo ( ₹1,600 crore), Sapphire Foods ( ₹1,500 crore), Fincare Small Finance Bank ( ₹1,330 crore), Sterlite Power ( ₹1,250 crore) RateGain Travel Technologies ( ₹1,200 crore) and Supriya Lifescience ( ₹1,200 crore) may float their IPOs during the amount under review, they added.

Angel One's Roy attributed the impressive IPO pipeline within the coming month to many factors, including a stronger-than-expected recovery within the economy after the second wave, continued FPIs and domestic flows within the markets and a rise in retail participation within the stock exchange within the past one year.

Going forward, the IPO boom is predicted to increase within the coming year if the prevailing market situation remains constant or doesn't change much, Kaushlendra Singh Sengar, founder and CEO at INVEST19, said.

Making an identical statement, Nikhil Kamath, co-founder of True Beacon and Zerodha, said if the Bull Run continues for subsequent 1-2 years, the IPO rush will continue. Moreover, the technology sector is predicted to stay a serious market driver.

So far, in 2021, as many as 40 companies have floated their IPOs to boost ₹64,217 crore. Further, Aditya Birla Sun Life AMC will launch its ₹2,778-crore initial share-sale on Michaelmas .

Apart from these, PowerGrid InvIT, the infrastructure investment company (InvIT) sponsored by power system Corporation of India, mopped up ₹7,735 crore through its IPO, and Brookfield India land Trust raised ₹3,800 crore via its initial share-sale.

This was way above ₹26,611 crore raised by 15 companies through initial share-sales within the entire 2020.

Such impressive fundraising through IPOs was last seen in 2017 when firms mobilised ₹67,147 crore through 36 initial share-sales.

According to Kamath, IPOs rely heavily on market cycles and therefore the IPO exuberance that has been witnessed within the last 18 months may be a function of the present bull cycle. Companies look to require advantage of investor sentiments.

"The market is touching new highs and therefore the strong response that we see within the primary market is nudging companies who were sitting on the fences to return and cash in of the buoyant market," Vikas Singhania, CEO of TradeSmart, said.

He, further, said that companies are raising money for growth capital or inorganic growth opportunities within the future.

Many of the IPOs are a suggestion purchasable (OFS), where private equity players or the promoter wants to live a part of their holding.

"Nowadays, the whole process of IPO garners tons of attention for such companies that act as an indirect promotion," Kamath said.

Initial share-sales are receiving tremendous applications from investors and IPOs are subscribing multifold times. This has pushed companies to boost funds through IPO.

The initial share-sales of just about a dozen companies including Paras Defense and Space Technologies, MTAR Technologies, Easy Trip Planners, Devyani International, Rolex Rings, Tatva Chintan Pharma Chem and Nazara Technologies subscribed over 100 times.

Interestingly, the continued civil year saw most of the IPOs opening with a premium over the difficulty price suggesting a robust investor appetite.

Laxmi Organic Industries, MTAR Technologies, Easy Trip Planners, GR Infraprojects, Clean Science and Technology, Macrotech Developers and Ami Organics which got listed this year, are trading above their issue price, giving smart returns within the range of 110 to 320 per cent, since listing, to investors.

INVEST19's Sengar said that with the present favourable rate of interest scenario along side high liquidity, financial institutions offer IPO funding products at lower rates. The lower cost of funding will still support the IPO boom.

Further, PSU disinvestment are going to be a blockbuster to support to ongoing IPO boom. Listing of LIC is predicted to happen in 2021-2022, which can be one among the most important IPOs within the history of the Indian market. this may aid the present ongoing buoyancy within the IPO marketplace for 2022, he added.

Earlier this month, Sebi Chairman Ajay Tyagi said that growth-oriented technology companies have raised ₹15,000 crore through initial share sales within the last 18 months and IPOs worth around ₹30,000 crore by such firms are within the pipeline.

"Growing number of unicorns within the startup ecosystem may be a testimony of the new-age tech companies coming aged in our economy. These companies often follow a singular business model focusing more on rapid climb than immediate profitability," he had said.