IPO Mania: India Inc may raise Rs 35-40k cr in FY18; NSE, GoAir, SBI Life eyed

The financial year 2016-17 witnessed a raising of Rs 51,288 crore through the public equity markets, 5 per cent higher than Rs 48,991 crore that was raised in the preceding year, said a PRIME Database report. The year, of course, fell short of Rs.86,710 crore, the highest amount that has ever been raised in 2009-10.

The government raised Rs. 40,997 crore which was 90 percent of the revised targeted amount of Rs. 45,500 crore and 73 percent of the original target of Rs. 56,500 crore for the year in the same period.

“The primary market has just been awakened from the state of hibernation. Considering the size of the economy, Rs 50,000 crore raised is just the normal capital needs that are met by the capital (primary) market,” Jimeet Modi, CEO, SAMCO Securities told Moneycontrol.com.

“The firming up of the bull market will bring in the real vibrancy in the primary market. The government has set the target for itself of Rs 62,000 crore for divestments, plus considering the private sector beeline, we think upwards of Rs Rs 40,000 crore would be raised by India Inc. from the primary market, provided there are no headwinds from the developed economies,” he said.

The amount raised from mainboard IPO’s almost doubled in the financial year 2017 to Rs 28,211 crore, compared with Rs 14,500 crore raised in the FY16, and Rs 2,770 crore raised in FY15.

The domestic institutional (DIIs) investors played a significant role as anchor investors, with their subscription amounting to 14 percent of the amount, almost the same as the 16 per cent from FIIs.

The appetite of retail investors jumped in the current financial year which most experts think was the driving force in oversubscription of most of the IPO’s which hit D-Street in FY17.

“IPO market in India has been witnessing fresh momentum in the recent past with many interesting stories coming up with public issues. The participation level from retail investors in many of the issues were good and especially post ASBA being made mandatory,” K V Sanil Kumar, Associate Director at Geojit Financial Services told Moneycontrol.com.

“We believe the primary market will thrive in a vibrant economy and India has been the most favoured market for many investors, with many new Entrepreneurial ventures coming and business enabling policies from Govt of India. The fund raising by India Inc. is estimated to be around Rs 25,000 crore to Rs 35,000 crore,” he said.

Govt sets high divestment target:

The Government has set an ambitious target of Rs 72,500 crore for 2017-18 which most investors think is achievable. “This target is achievable. Reduction in the Government’s holding in 18 listed CPSEs to 75 per cent alone can contribute to Rs. 20,678 crore,” Pranav Haldea, Managing Director, PRIME Database said in a report.

“Further, the Government has also placed a roadmap for over 110 unlisted profit making CPSEs to get listed in the next two financial years which includes several large companies for insurance and railways sector. Lastly, the Government has also already identified 15 CPSEs for a strategic sale,” he said.

Top Hot IPO’s to watch in FY18:

While the IPO market is termed as the ‘primary market’, the fact is that the activity here gets rolling only with a lag when the secondary market is active or in some kind of excitement stage.

“Considering that FY17 has been a good year for Indian equities with an equally positive outlook for FY18, we believe that the primary market would continue to see the considerable positive action going forward,” Hitesh Agrawal, EVP & Head – Retail Research at Religare Securities Ltd told Moneycontrol.com.

“There are several IPOs in the pipeline, which are expected to get offered to investors in FY18. Some of the notable ones amongst these include the IPOs of NSE, GoAir, Hudco, CDSL, SBI Life, Aster DM Healthcare, Security & Intelligence Services, Continental Warehousing, Nakshatra World etc.,” he said.

“It is pertinent to note here that the government has set an ambitious divestment target of Rs72,500 crore for FY18, and state-run insurance companies like General Insurance and New India Assurance are also contemplating IPOs,” he said.

According to Haldea, 2017-18 looks very promising. Already at the beginning of the year, there are 13 companies holding SEBI approval wanting to raise over Rs. 9,230 crore and another 10 companies wanting to raise about Rs. 16,736 crore awaiting SEBI approval.

Stars of FY17:

According to Prime Database, 15 IPOs received mega response of more than 10 times such as Advanced Enzyme, followed by Quess Corp, Avenue Supermarts, Thyrocare Technologies, RBL Bank, Mahanagar Gas, Shankara Building Products, GNA Axles, BSE, Endurance Technologies, Ujjivan Financial, Music Broadcast etc. 5 other IPOs were oversubscribed by more than 3 times. The balance 5 IPOs were oversubscribed between 1 to 3 times.

Retail investors were eager to lap up fresh issue of shares which highlights bullish sentiments on D-Street. “The highest number of applications received from retail investors was for Avenue Supermarts at 17.40 lakh followed by BSE (11.32 lakh), Larsen & Toubro Infotech (10.25 lakh), ICICI Prudential Life Insurance (10.24 lakh) and RBL Bank (10.16 lakh),” said the Prime database report.

The largest IPO was from ICICI Prudential Life Insurance for Rs.6,057 crore. The average deal size was a high Rs. 1,128 crore. “A notable feature of the year again was that several companies that hit the market had a prior PE/VC investment,” highlights Haldia.

“This was true for 11 out of the 25 IPOs. Offers for sale by such PE/VC investors at Rs.4,244 crore accounted for 15 percent of the total IPO amount. Offers for sale by promoters at Rs. 10,953 crore accounted for a further 39 per cent of the IPO amount,” he explains.