The initial public offering (IPO) market is set for a boost as companies advance their listing plans to cash in on the boom in the secondary market. Sources say about half a dozen issuers are looking to launch their offerings in the next four to six weeks to raise as much as Rs 10,000 crore.
Railtel Corporation of India, Burger King, Brookfield REIT, Home First Finance and Kalyan Jewellers are among the companies looking to tap the market.
Many companies are eager to revive their almost-shelved IPOs as resurgence in the market offers them a fresh shot to come to the market. China's Fosun Pharma-led Gland Pharma on Wednesday concluded its Rs 6,480-crore IPO.
The benchmark Sensex has rallied 10 per cent in just eight trading sessions of this month. The index has extended its gains from Covid-19 lows in March to nearly 70 per cent. This month’s rally in particular has been fuelled by the optimism around the US election results and the progress in clinical trials for Covid-19 vaccine. Foreign portfolio investors (FPIs) have poured in more than Rs 20,000 crore into stocks this month.
The liquidity gush coupled with favourable valuations is seen as a major boost for companies ready with approvals but waiting on the sidelines to launch their IPOs. Also, the recent corporate earnings and trends of recovery in the GST collection figures have also boosted confidence.
Eight companies had hit the market with their IPOs in September 2020. However, the activity slowed down in October as companies went inti in a ‘wait and watch mode’ ahead of the elections in the US, an important market to determine success of any fund raise.
"The US portion of the book, which needs to be subscribed in the IPO has a lot to do with the emerging market allocation that those investors will keep at any point in time. If the emerging market appetite itself goes down, then it has an impact on the demand for these issues. The US investors sentiment is significant once you start the roadshows because they give you that delta," said Skanda Jayaraman, managing director and head of investment banking, Spark Capital.
Bankers further said that there was a fear that markets could swing either way after the US elections.
"A lot of what happens in Indian markets is a reflection of what is happening in the US. The companies want to avoid election-related uncertainties," said Rajendra Naik, managing director, Centrum Capital.
Bankers said that a lull in the IPO market common during election months. "One sees a similar trend in India as well in the months preceding general elections," said Pranav Haldea, managing director, Prime Database. Not even a single IP0 hit the markets during the last three phases of the Lok Sabha elections in 2019.
However, the US election results has proved to be a tailwaind for equity markets. Analysts are seeing the outcome – with Democrats in the White House and Republicans holding the Senate – as the best-case scenario for equity markets.
Experts say while the current market conditions are suited for IPOs, one also has to look at the preparedness. Launching an IPO is a long-drawn process and requires months of planning.
Investment bankers say a meaningful pick up in the IPO market can only be seen in the first half of next year.
"Those companies which are planning to come with their issues after US elections had filed their documents long back and there are not many of them. But we could see more companies hitting the market from January onwards," said Naik.
Apart from US elections, the way Covid-19 situation pans out in India, and the rest of the world will be the key factors that investors will be keenly watching. There is a second surge of Covid in the US and Europe. And though there is a decline in India as far as Covid cases are concerned, there are worries about a surge after the festive season. Businesses which demonstrate resilience to the pandemic would be looked at favourably, say experts.
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