India’s stock markets are unlikely to face a flurry of initial public offerings after the Life Insurance Corporation of India share sale ends because volatility will keep most companies on the side-lines, analysts said.
The LIC share sale on May 4-9 is expected to fetch the government Rs 21,000 crore, making it the country’s largest IPO. It will follow IPOS from Campus Activewear and Rainbow Children’s Medicare, which concluded this week.
“The IPO line-up is bulky and strong, but there’s a wait-and-watch strategy by the issuers due to market conditions being dicey and the pending public offer of financial behemoth LIC,” said Manan Doshi, cofounder of UnlistedArena.com.
India’s stock markets are under pressure due to the ongoing Russia-Ukraine conflict. Surging inflation globally, policy tightening by central banks, and continued selling of shares by foreign investors also worried investors. The key BSE Sensex and Nifty 50 indices have declined 1.8 percent each so far in April and 1.2 percent each this year.
Once the LIC IPO concludes and equity market conditions improve, Delhivery, an Indian logistics and supply chain startup, and API Holdings, the parent company of online pharmacy PharmEasy, are likely to launch their share sales, said a banker who did not want to be identified.
However, investors will remain cautious on IPO pricing and valuations after seeing many wealth destroyers. Paytm owner One97 Communications, CarTrade and Fino Payments Bank have declined 20-70 percent from their issue price. New-age listed firms Zomato and FSN E-Commerce Ventures are down over 50 percent from their recent highs.
Cautious investors
“In the ongoing IPOs, investor interest is not uniform. Investor interest will depend on two things – how much the QIB (qualified institutional buyer) portion is oversubscribed and the trend in the grey market premium,” said Deepak Jasani, head of retail research at HDFC Securities.
After IPOs worth a record Rs 1.18 lakh crore in 2021, only six companies launched initial share sales this year, raising around Rs 8500 crore. These are Adani Wilmar, Vedant Fashions, AGS Transact Technologies, Veranda Learning Solutions, Campus Activewear and Rainbow Children’s Medicare.
According to analysts, over 54 companies have approval from the Securities and Exchange Board of India to raise about Rs 75,000 crore. Another 50 companies planning IPOs for about Rs 80,000 crore are awaiting the regulator’s approvals.
Doshi said companies preparing to sell shares will likely price them reasonably and keep value on the table for investors.
According to analysts, the LIC IPO will get a good response from retail and institutional investors. There has been a rise in the number of accounts opened to hold shares in dematerialised (demat) or digital form, a requisite for investing in the stock market.
“A recent sharp rise in retail participation in the country’s stock markets can be gauged from the 289 lakh new demat accounts opened from April 2021 to January 2022 and the IPO offers a fresh chance to deepen the equity markets further,” said Mohit Nigam, head - PMS, at Hem Securities. “The insurance giant’s huge policyholder base has the potential to bring a large number of new investors, who have historically relied on traditional saving products, to the capital market.”
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