Mumbai: Investment bankers said primary markets are set to cool further this year as anchor investors burning their fingers in new-age IPOs in 2021 have turned wary of the market mood. These investors, many of them foreign portfolio investors, may prefer the safety of traditional sectors, that too at discounted valuations.
Bankers said sentiment could improve if the US Federal Reserve holds off on raising rates at its meeting in early May, making emerging market equities attractive again to US investors and ending the year. Or the sentiment could be revived for initial public offerings by the first quarter of 2024.
View Full Image
Primary market fundraising could drop 35%, according to an investment banker Rs 59,412 crore in 2022 38,000 crores- 40,000 crore this year. While quality IPOs in traditional sectors such as fast-moving consumer goods (FMCG), pharmaceuticals and technology may drive sell-off, valuations may be discounted, increased volatility and investors’ bitter experiences with new-age tech companies Looking at, the banker said on condition of anonymity. In 2021, a blockbuster year for primary markets, 63 companies set records 1.19 trillion through IPO.
V. Jaishankar, director, Kotak Investment Banking, said, “The last financial year (FY23) saw 37 mainboard IPOs, which were significantly lower than in 2021 and Life Insurance Corp accounted for a good measure of value.” A strong track record and fundamentals will make their Street debut amid heightened volatility driven by global events. Primary market sentiment will improve if the Fed holds off on its rate hike in May.”
Anchor investors including FPIs, mutual funds and insurance companies provide stability to the IPO. In a company with identifiable promoters, anchor investors can sell half their stake one month after listing and the rest after three months. Retail investors often scan the list of anchor investors to ascertain the quality of an IPO. In 2021, many new-age tech companies like Policy Bazaar, Zomato and Paytm went public. Many of them listed at a discount and soon began a protracted downtrend, and anchor investors who remained in the 12 months in the absence of identifiable promoters suffered badly as their valuations took a hit.
The investment banker previously quoted, “It’s a case of being bitten once—twice shy.” Turbulent and this year has been the same. While companies have filed offer documents with SEBI this year, it is the larger and more fundamentally strong ones that will attract anchor investors.”
Bankers also said IPOs could be clustered in the December quarter, as happened last year. The offer documents filed with SEBI so far this year are 21 for an estimated amount of Rs. 28,260 crores, as per Prime Database. Pranav Haldia, managing director of Prime Database Group, said last year 17 out of 40 IPOs hit the market in the last two months, as most of the volatility in 2022 was not favorable for IPOs.
Last year, the Nifty index jumped 24% between a low of 15,183.4 in June and a high of 18,887.6 in December. This year, the market fell 8% from an early 2023 high of 18,265 to a mid-March low of 16,828.35.
Tata Technologies and Tata Play are some of the prominent companies that have come up with IPOs this year. Mankind Pharma on Wednesday announced that it is its first issue with a secondary sale price of Rs. 4,326 crore by PE investors Capital International (5%), ChrysCapital (2.5%) and Promoters (2.5%), will run during April 25-27.
Know your inner investor
Do you have guts of steel or are you a victim of insomnia regarding your investments? Let’s define your investment approach.
catch all business News, market news, today’s fresh news events and Breaking News Update on Live Mint. download mint news app To get daily market updates.