The IPO frenzy is far from finished, and merchant bankers predict that the main market will be a flurry of activity in the March 2020 quarter, with almost two dozen businesses trying to raise about Rs 44,000 crore via initial share sales. Technology-driven enterprises will get a big portion of the overall financing.
This comes after 63 firms raised a total of Rs 1.2 lakh crore via initial public offers (IPOs) in 2021, despite the pandemic’s looming shadow over the economy. Aside from these companies, PowerGrid InvIT (Infrastructure Investment Trust) raised Rs 7,735 crore via its initial public offering, while Brookfield India Real Estate Trust raised Rs 3,800 crore through its REIT (Real Estate Investment Trust).
In 2021, continuous frenzy in the IPO market was fueled by excess liquidity, enormous listing gains, and rising retail investor engagement. Hotel aggregator OYO (Rs 8,430 crore) and supply chain company Delhivery (Rs 7,460 crore) are among the companies projected to seek capital via IPOs in the March quarter, according to merchant bankers.
They also anticipate Emcure Pharmaceuticals (Rs 4,000 crore), Adani Wilmar (Rs 4,500 crore), Paradeep Phosphates (Rs 2,200 crore), Vedant Fashions (Rs 2,500 crore), Medanta (Rs 2,000 crore) and Ixigo (Rs 1,800 crore) to launch their maiden share sales.
Healthium Medtech, Skanray Technologies, and Sahajanand Medical Technologies are all expected to issue initial public offerings within the time frame under consideration, according to merchant bankers. These companies are seeking money to finance organic and inorganic growth efforts, debt repayments, and shareholder exits.
“A company’s first public listing is done to raise cash via the public, which boosts the liquidity of the share and aids in value discovery,” stated Recur Club’s founder. The founder and CEO of LearnApp.com said that software businesses today want to grow internationally, and in order to do so, they would need funding, which is obtained via the IPO method. Furthermore, anchor investors in these firms have been waiting for an exit to be compensated, and this exit is now available to them via the IPO route, he noted.
The primary market’s continuous activity comes as the Securities and Exchange Board of India (SEBI) has opted to tighten IPO guidelines in order to address the high volatility in stock prices on their listing day. These restrictions include limiting the amount of issue proceeds a firm may use for undisclosed inorganic expansion, restricting the amount of stock that selling stockholders may offer, as well as extending the lock-up time for shares subscribed by anchoring investors.
“Inability to raise money for future unidentified acquisitions would impact capital raising plans of some unicorns,” said an expert, “especially in cases when the company has no other purpose for funds and current shareholders are hesitant to sell.” He went on to say that the changes are mostly in response to multiple IPOs scheduled for 2021. “These suggested legal changes may have a long-term effect. Issuers looking to list on Indian stock markets may be impacted by these developments,” he added.
Moving from the secondary market
According to market experts, the trend of international portfolio investors selling equities with high valuations to reinvest in the primary market in 2021 may spread to individual investors and domestic institutional investors. The secondary market may be put under pressure as money is transferred to the primary sector, they noted.
Several key market records were broken in 2021, as you may remember. Two firms, Latent View Analytics and Paras Defense and Space Technologies, had their initial public offerings (IPOs) over 300 times subscribed for the first time.
The IPO craze in 2021, according to experts, was a worldwide phenomena. India, in fact, profited from this. In 2021, IPOs raised more than $450 billion globally, up 67% from the previous year. In 2021, India raised $17 billion, the most in two decades.