2016 may see biggest sum raised via IPOs in 6 yrs: Sanjay Sharma

"The number of deals filed or cleared by SEBI is USD 3.5 billion."Below is the verbatim transcript of Sanjay Sharma’s interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.Anuj: One thing that stands out this year is that most initial public offerings (IPO) have made money and have made good money for investors. What is going right, is it pricing, is it the quality of issues, is it the fact that it is some niche companies coming into the market, how would you describe it?A: I would say it is a combination of all this. One, of course the size of the IPOs have not been large. If you see in the last two-three years the largest one has been Indigo which was USD 400 million plus. Two is, given the market sentiment in the secondary market side you are seeing a lot of retail investors also coming in and given the fact that the institutional investor feedback is already taken into account while pricing the deals and since the retail also comes in all the three buckets being subscribed also helps in terms of the IPO. And you are right, in the last two years if you see most of the IPOs have done well post listing as well.Sonia: We have noticed that there is a lot of interest in the IPOs in the financial space, whether it is Ujjivan, Equitas. We have a couple of new ones that are coming up, whose Draft Red Herring Prospectus (DRHP) have been filed, whether it is RBL Bank, PNB Housing Finance. Do you see a lot of money to be made within this space?A: Yes, and one of the reasons from that is if you look at any Foreign Institutional Investors (FII) investment or domestic mutual fund investment a large portion of that is attributed to financial segment and financials so far was not that diversified because you have banks, public sector, private sector and now some Non-Banking Financial Company (NBFC). Now you are seeing some other sectors being micro finance companies, insurance companies, we have seen ICICI also filing an offer document today. So, that diversification actually helps these investors to actually allocate that money to the fixed sector as well.Anuj: So, since you spoke about ICICI, insurance, this is going to be a big issue. Do we see some more in this sector and how big is this going to become, the insurance sector as far as the market is concerned?A: It is early days, if you look at broadly in the public domain ICICI was one, HDFC Life was the other which has gone through the merger route, so that will automatically list as and when the requisite approvals are done. But beyond this I don't see too much on the life insurance space coming in.Anuj: But will this give some valuation metric for the secondary stocks. They have a lot of insurance exposure?A: Yes, as I was saying diversification in the fixed sector happens. So far there was no benchmark available, Max was possibly the only first one which had pure insurance play and now with HDFC coming in it would have a meaningful size as well and of course with ICICI coming in you will have proper benchmarks for investors to look at.Sonia: What about the other themes, how about something like healthcare? What kind of interest do you see there and what are the launches looking like?A: Again, without getting into specific names but one theme which is coming across is diversification within the sectors. As I talked about fake diversification if you look at healthcare, I don't remember apart from say, Alkem which was a pure pharmaceutical company listing you have Pathlabs coming in, you have smaller hospitals, specialised hospitals coming in. So, that diversification theme is playing out in all the sectors.Even if you look at industrials which is a very broad name possibly including infrastructures and others but there you are seeing in IPOs like smaller logistics companies coming in or green power coming in, even if you look at Indigo is also a part of industrials. So, diversification within a particular sector is playing out now.Anuj: Merchant bankers deserve a lot of credit for pricing some of these issues fairly well along with promoters. But we have seen good IPOs at good price. We have seen a couple of bad ones but at a good price, are we now going to move to good companies at bad price and then finally bad companies at bad price?A: This is an equilibrium I hope that whatever equilibrium we have seen right now continues but this is a pendulum at points of time it will swing one way, at points of time the other way. But the indication so far are that people have become reasonable. At the same time I would not take undue credit on bankers being the ones who overpowerly decides the prices, it is a combination of everybody.Sonia: So, what is the kind of money that we are looking at? In the first half of 2016 we have seen over Rs 8,000 crore moped up by IPOs, the highest in the last six years. Do you think that the second half will be better than the first half?A: Without getting into this, just a couple of pointers. My sense is this year we will see the largest amount raised in IPOs in the last five-six years, I would say. 2010 was the other large year. If you look at the number of deals which are either filed with SEBI or cleared by SEBI that number is close to around USD 3.5 billion. Now whether that gets completed in the next six months or it takes another 18 months is anybody's guess. But I would say that this year possibly we will see the largest raised in IPO since 2010.