IPO fund-raising at 5-year high

21 companies have raised Rs 13,330 crore through IPOs between April 2015 and February 2016, data suggests

Fund raising through initial public offers (IPOs) in a financial year has touched a five-year high with 21 companies having raised a total of Rs 13,330 crore through IPOs between April 2015 and February 2016, data sourced from PRIME Database suggests.

In addition, cancer care specialist HealthCare Global Enterprises raised Rs 650 crore during March 2016, while Infibeam Incorporation - the first Indian e-commerce firm to launch an IPO - proposes to raise Rs 450 crore (issue closed on Wednesday) during the current month.

By comparison, 52 companies had collectively raised Rs 33,098 crore via the IPO route during financial year 2010-11 (FY11).

"Over the past few years, there has been lack of participation from the retail investors in the primary market in the backdrop of lacklustre secondary market. However, the last financial year was different since investors exhibited some confidence and thematic plays like logistics and healthcare doing well," said G. Chokkalingam, founder & managing director, Equinomics Research & Advisory.

Meanwhile, of the 21 companies that debuted on exchanges during the current fiscal, stocks of over half, or 11, are currently trading 4 per cent - 82 per cent higher the issue price. The remaining have slipped 4 per cent - 38 per cent below their issue price. By comparison, the S&P BSE Sensex has lost 9.3 per cent thus far in the current fiscal.

"Investors have been selective last year and have an appetite for good issues. However, the post listing performance has been diverse. This also suggests that investors are ready to put in money in case the company's fundamentals are good. We have seen such issues get oversubscribed. Another important factor is the pricing of the issue. If the investors feel that there is an upside available and the company is on a strong fundamental footing, such issues have seen a huge appetite and a good upside post listing," points out Kamlesh Rao, chief executive officer, Kotak Securities.

IPO pipeline

There are about 24 companies that have already got the market regulator, the Securities and Exchange Board of India (Sebi), approval to raise nearly Rs 12,000 crore through the primary market. The list includes Larsen & Toubro Infotech, Mahanagar Gas, Ujjivan Financial Services, AGS Transact Technologies and Equitas Holdings.

"With the government doing all the right things in the Budget and even dropping interest rates on small savings schemes, if interest rates come down, the cost of borrowing for companies will also improve. Given the developments, the next year promises to be a good year - both for the secondary and the primary markets," Rao of Kotak says.

Reports also suggest government's intent to sell 10 per cent stake in at least one insurance company in 2016-17, beginning with the listing of New India Assurance. The listing of other general insurance companies such as United India Insurance, National Insurance and The Oriental Insurance through initial public offerings (IPOs) is also being considered, reports say. The move is in-line with the Union Budget proposal to list government - owned general insurance companies.

Chokkalingam, however, suggests that the offering from the PSU general insurers may not find many takers.

"I doubt these issues will find many takers. One needs to look at the business model and the valuation enjoyed by the PSU banks and other PSU manufacturing companies. Many a times, Life Insurance Corporation (LIC) has to bail out issues. The PSU tag, in my opinion, at times kills the valuation premium. The valuation that we are seeing of PSU banks and other manufacturing companies would continue for insurance companies also," he says.

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