Primary markets will be busy in the first six months of FY24 but H2 will be volatile as 2024 general elections inch closer, according to Ajay Garg, managing director at Equirus Capital.
The total amount raised through initial public offerings (IPOs) stood at Rs 52,116 crore in FY23, of which LIC alone was Rs 21,000 crore. If that is stripped off, then the IPO fundraise was only about Rs 31,000 crore.
“For FY24, I expect the amount to be around Rs 50,000 crore. As investment bankers, we are focusing on activity in the first half of the year because we have seen volatility in markets in the months prior to general elections,” he said in an interaction with Moneycontrol.
Equirus was the manager for the IPOs of DreamFolks and Prudent Corporate Advisory Services in FY23. While DreamFolks is up 33 percent since listing, Prudent has gained close to 68 percent.
It was also the manager for the IPO of Divgi TorqTransfer Systems, which is up 36 percent since its debut in March 2023. Among the misses is Inox Green Energy Services, down 15 percent since listing. Going ahead, Equirus has public offerings of Zaggle, Netweb, and Biba Fashions among others lined up.
On mispricing of IPOs
The Securities and Exchange Board of India (SEBI) has been tightening regulations after several investors burned their fingers in the massive wealth destruction caused by Paytm, Zomato and Nykaa. The offer prices of these companies, most of them loss-making, raised several eyebrows.
In September 2022, the market regulator said that the issuer shall disclose details of the pricing of shares based on past transactions and fundraising activities.
“SEBI is spending more time with the bankers understanding the rationale for pricing. If people are misselling by providing wrong information, then they should be penalised. But at the end of the day, it is a free market,” said Garg.
Equity is a product at the end of the day. “If it’s a bear market, you need to show performance. If it's a bull market, you need to show promise,” he added.
That said, retail investors have become more cautious. Retail portions in the public offerings of Mankind Pharma and Avalon Technologies did not see full subscription in April. According to analysts, the valuations of both companies were slightly on the higher side compared to peers.
As markets inch closer to all-time high levels and activity in primary markets picks up, it remains to be seen if once-bitten-twice-shy investors continue to remain on the sidelines.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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