Mumbai: Companies from the banking, financial services and insurance (BFSI) sector are pressing ahead with plans to launch their initial public offerings (IPOs) even as aspirants from other sectors review theirs. Among those preparing to tap the equity markets in the next couple of months are microlenders, affordable housing financiers and insurers.
Out of the seven IPOs in Indian markets in 2018-19, three have been from the BFSI sector, including the vastly-oversubscribed IPO of HDFC Asset Management Co. Ltd.
The other two BFSI deals were those of IndoStar Capital Finance Ltd and CreditAccess Grameen Ltd.
Investor interest in these companies comes at a time when the primary market has become crowded with several issuers filing documents, but held back by a volatile market and deep valuation corrections. Mint reported on 10 August that at least 32 companies that have won permission from markets regulator Securities and Exchange Board of India (Sebi) to raise over ₹ 41,000 crore (approximately $6 billion) through IPOs are yet to hit the street. The predicament facing these companies is that while the benchmark Sensex has seen appreciation this year, the broader mid-cap and small-cap indices have seen high volatility, affecting sentiment for companies coming to the primary market from these segments.
According to at least four people aware of the developments, who spoke on condition of anonymity, private equity-backed affordable housing finance company Aavas Financiers Ltd is in advanced stages of its investor roadshow, while microlender Spandana Sphoorty Financial Ltd started its roadshows recently. Both companies have seen strong demand from investors and are looking to launch their respective share sales in the coming month.
“Aavas is seeing very strong demand from investors. The roadshows will be wrapped up soon. They are looking at launching the deal sometime around mid-September. Investors are definitely more keen on companies from the BFSI sector than others. Consumer facing businesses are attracting more interest from investors,” said one of the persons cited above, requesting anonymity as he is not authorized to speak with the media. According to a second person, the IPO of Spandana Sphoorty is expected to also hit the market towards the latter half of September, sometime after that of Aavas Financiers.
“The roadshows for Spandana were started recently and so far, the interest in the deal is strong. Investor interest in BFSI sector is also to do with the fact that these are large offer sizes with large market capitalizations. Investors are not too keen on smaller companies with ₹500 crore IPO size and a ₹2,000 crore market cap, but a ₹1,000 crore IPO with a ₹4,000-5,000 crore market cap and above is still attractive in this market, if priced rightly. The BFSI IPOs fall in the latter category,” he said.
Aavas is looking to raise around ₹ 1,800-2,000 crore, while Spandana is expected to raise over ₹1,000 crore from its share sale. The targeted launch timelines of these deals, however, are contingent on them receiving a go-ahead from Sebi. There are other financial services companies that are targeting to launch their deals over the next two months.
Insurance firm PNB Metlife India Insurance Co. Ltd and microlender Muthoot Microfin are targeting an October launch, said the third person cited above. The PNB Metlife IPO is expected to be around ₹2,800-3,000 crore in size, while the Muthoot Microfin IPO is likely to be around ₹ 1,000 crore.