Aadhar Housing Finance, travel firm Ixigo and lender Five Star Business Finance are some of the big issuers that plan to approach institutional investors with an aim to tap the public markets around mid-October to November, three people said of the development. Told about Collectively, these companies have plans to raise 11,000 crores from their initial share sale.
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A revival in the primary market came as the benchmark Nifty reclaimed the 18,000 mark on Tuesday, for the first time since April this year. Sensex is also trading above 60,000. Benchmark indices have gained nearly 18% from their June lows.
“Indian markets are witnessing a strong performance, and this has opened the window for some deals. Right now, we are primarily seeing smaller issuers coming into the market. The response to these deals has been encouraging and thus, other big companies are also now gearing up to see if they can launch their IPOs,” said one of the three people mentioned above.
Others, such as media company Asianet Satellite Communications and car dealership Landmark Cars, are also likely to launch investor roadshows, said the people cited above, who work with investment banks.
Emails sent to Aadhaar Housing Finance, Exigo, Five Star Business Finance, Landmark Cars and Asianet Satellite remained unanswered till press time.
There have been three IPOs in the primary markets so far after a gap of two months since May. Sirma SGS Technologies, the first company to hit the market, subscribed 32.6 times the shares on offer. The shares gave up 42% on their trading debut. The IPO of Dreamfolks was subscribed 56.7 times and witnessed a rise of 42% on the day. The third IPO – Tamil Nadu Mercantile Bank – got subscribed 2.8 times. Another IPO Harsha Engineers is opening on Wednesday.
Continued buying of Indian shares by foreign institutional investors (FIIs) is also encouraging large issuers to evaluate IPO launches.
FIIs have been net buyers of Indian equities since July, with overbought Since then shares worth Rs 64,000 crore, data shows. FIIs sold for six months to June 30 Indian stocks worth 2 trillion. “We have seen several large block trades in the recent weeks be it Zomato, Max Healthcare, Sona Comstar and many others where FIIs have shown strong interest in buying a large chunk of the stock. Such block deals are usually seen as a precursor to primary market activity,” said another person.
The action in the primary market will also be driven by those companies who wish to use the current window of opportunities either before the expiry of SEBI approval or before the expiry of financial numbers. SEBI approval for IPO is valid for 12 months.
As per SEBI norms, the financial numbers for a particular quarter are valid only for 135 days and hence, the June financials (last completed quarter) of the companies will be valid only till mid-November. If companies do not take advantage of the current market window, their ability to initiate deals may be delayed as they will have to file their red herring prospectus along with September-quarter financial statements, which may take time to prepare And thus, companies may miss the current market window, the other person said.
“For companies whose SEBI approval expires in November or December, this is a good opportunity to see if they can tap the markets, as investor interest has returned to IPOs. We expect to see a good amount of action in the primary market from mid-October to mid-November,” said another person.
To be sure, many of these IPO-bound companies may have to revise their plans to suit the current market reality.
“The reality is that investors are still cautious and thus, valuation expectations will have to remain muted. Most companies planning a launch will have to do so at a valuation lower than at the time of filing the IPO paper,” said a third investment banker, who spoke on condition of anonymity.
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