What is an IPO?

The process of issuance of shares by a private company to the general public through a medium of exchange (e.g. NSE, BSE) is known as Initial Public Offering abbreviated as an IPO. The proceeds received after the Initial Public Offering could be used to fund the company’s expansion plans, meet its working capital requirements, or for general corporate purposes.

Ideally, every bull market will have one particular thing in common: a flurry of companies filing for an Initial Public Offering (IPO). The bullish sentiments of the investors make it easier for private companies to raise funds and get their companies listed over the exchanges.

Securities and Exchange Board of India. (SEBI) is the regulator of the financial markets in India and has laid down certain rigorous norms which the companies have to fulfil before going public. The whole process instills credibility in the public that listed companies have passed SEBI’s requirements and could potentially be a strong company.

Top IPOs to be expected in 2021:

Let’s have a look at the companies that are planning to go public and have filed their drafts of the Initial Public Offering with SEBI:

Paytm

A draft red herring prospectus (DRHP) has been filed with SEBI for INR 16,600 crores by One 97 Communications Private Limited which is the parent company of Paytm. The sheer magnitude at which the company intends to raise money makes it one of the top IPOs for 2021 and could potentially make it the biggest IPO in India’s history surpassing Coal India’s IPO of INR 15,000 crores back in 2010.

According to RedSeer, Paytm, which was initially launched in 2009, is India’s “digital ecosystem for consumers and merchants”. The offerings of the company include payment, commerce, cloud, and financial services to its 333 million customers and 21 million merchants (registered as of March 31, 2021). The company initially started digitizing bill payments and mobile top-ups and then gradually shifted to Paytm Wallet which became the bedrock for one of India’s largest digital ecosystems. As of March 31, 2021, the company has generated INR 28 billion as revenue from operations with over INR 4 trillion in total gross merchant value and INR 7.4 billion in terms of total transactions.

The IPO comprises a fresh issue of INR 8300 crores and an offer for sale of shares of existing shareholders up to INR 8300 crores. The objective of the offer is to invest in new business initiatives, acquisitions, and strategic partnerships and to fund general corporate requirements.

Penna Cement

Penna Cement plans to raise INR 1550 crores from the primary market. The company was established in 1991 and is one of India’s leading cement manufacturing companies with an installed cement capacity of ten million tonnes per year. The company has a larger presence in southern and western India. The company recorded a revenue of INR 2476 crores with a net profit of INR 152 crores in the last fiscal.

The issue comprises INR 1300 crores as a fresh issue and an offer for sale of INR 250 crores. The objective of the offer includes repayment / prepayment (in part or full) of the debt, funding of capital expenditure requirements of multiple expansion projects (KP Line 2 project, upgrading the raw grinding and cement mill at Talaricheruvu, and setting up the waste heat recovery plant at Tandur) and general corporate purposes.

MobiKwik

Another top IPO to watch out for is the one of One MobiKwik Systems Limited. MobiKwik, a fintech company that commenced its operations in 2009, is now one of India’s largest mobile wallets. It also functions as one of the largest players under the Buy Now Pay Later segment in India. The corporation leverages big data analytics and deep data sciences to enhance user experience over the platform.

The company plans to raise INR 1900 crores through an Initial Public Offering. The offer comprises INR 1500 crores as a fresh issue and INR 400 crores as an offer for sale of the existing investors as per the filings with SEBI. The company intends to use the proceeds of the funds to focus on acquiring and retaining users and merchants and strengthening their core platform of operation to offer a delightful user and merchant experience. The proceeds of the IPO will also be used to fund organic and inorganic growth and for general corporate purposes.

Go Airlines

Go Airlines (India) Limited, owned by Wadia group, has applied for an IPO with SEBI worth INR 3600 crores. The company classified itself as an ultra-low-cost carrier that focuses upon low unit costs and delivering value to customers that drives their revenues. This airline is one of the rapidly growing airlines with an increase in market share from 8.8% in FY18 to 10.8% in FY20. The company’s target market is young Indians and MSME businesses and is focused on providing unique value to its growing target market. The company recently rebranded itself as “Go First” from “Go Air” ahead of its plan to go public.

The company plans to largely use these funds for prepayment or scheduled repayment of their debt (in part or totality). The company also aims to use the funds for the replacement of letters of credits and repayment of dues to Indian Oil Corporation Limited (IOCL) for the supply of fuel to their company. Lastly, they would want to utilize the funds for general corporate purposes.

The aviation sector had been one of the worst affected segments due to the pandemic but with the massive rollout of the vaccines and the unlocking of the economy, the aviation industry is poised to recover fast from the economic downturn in the last couple of years and Go Air could be one of the biggest beneficiaries of the same. Being a publicly listed company could also increase its brand recall and hence could be one of the top IPOs of 2021.

Listing of Zomato

Recently, Zomato, one of India’s leading foodservice platforms went public and gave stellar listing gains to its shareholders. ​​On the listing date itself, the company managed to hit a market capitalization of INR one lakh crore but closed at a market capitalization of INR 98,211 crores on the closing bell. Zomato was originally priced at INR 76 per share. Upon listing, the stock managed to hit the upper circuit of INR 138 per share and managed to close at 125.85 per share providing a whooping return of nearly 66% to its investors on the listing date itself. Zomato is the first Indian internet unicorn to go public and has set the platform rolling for many more such IPOs soon.

Conclusion

With each bull market, there will be a flood of Initial Public Offerings (IPOs), with each company trying to potentially ride the wave of the bullish sentiments of the investors and hence investors must cherry-pick the best IPOs to invest in as the valuation of certain public issues tend to get stretched and investors might just end up overpaying for a particular company. While multiple companies have filed a DRHP, the above-mentioned could potentially be the top IPOs to look out for going forward!