In just a fortnight, domestic equity markets would see half a dozen companies raising close to Rs 30,000 crore from the investors via their initial primary offerings (IPOs).
Interestingly, these issues are a mixed as a couple of them are quite large – LIC and Delhivery, (raising more than Rs 5,000 crore), two are mid-sized – Rainbow Children’s and Campus Activewear (raising more than Rs 1,000 crore) and two are comparatively smaller one Prudent Corporate and Venus Pipes (raising less than Rs 1,000 crore).
However, analysts are divided over the revival of the primary market. Some of them say IPO mart has got its charm back, whereas others say it’s a hoax for the investor as of now.
Among the six issues mentioned about, Campus Activewear made its strong debut on Monday and LIC’s IPO will also close for subscription on the same day, followed by the listing of Rainbow Children’s Medicare on Tuesday.
IPOs pipeline in the current week includes Tech-based logistics startup Delhivery, retail wealth management player Prudent Corporate Advisory Services and steel pipes’ manufacturer Venus Pipes & Tubes will launch their issues this week.
Deepak Shenoy, smallcase manager, Founder and CEO, Capitalmind, said there is no real revival of primary markets.
The IPO of LIC is just an attempt by the government to get something out of an IPO they planned for a long time, he said.
“Given the market moves, it appears that the market may not see more IPOs in the near future until there is a revival of sentiment,” Shenoy added.
On the contrary, Vijay Singhania, Chairman, TradeSmart said that despite the secondary market witnessing selling pressure in line with global markets, primary markets in India have picked up.
“The success of LIC and loss-making startup Delhivery IPOs will determine the sentiment and appetite of the primary market in the near term,” he added.
In 2021, homegrown companies raised Rs 1.19 crore through their initial stake sales, which is a record for any year. Before this, India Inc raised about Rs 26,613 crore through 15 IPOs in 2020.
In the last 18-20 months, Indian primary markets have seen several companies hitting the Dalat Street with their initial offering, getting historic responses, and bumper listings and then dropping down sharply during the corrective phase.
Banerjee, smallcase manager, Founder and CEO, Lotus Dew said that IPOs unlock capital which creates velocity of investing as the cash is available.
“In contrast, RBI increased repo rates by 40 bps which is actually taking away money from lending markets by increasing CRR. So while central banks are reducing money supply to markets, equity IPOs are providing capital to be deployed,” he added.
The sharp correction in the secondary markets lately has dented the sentiments for the primary markets as well. Barring a few names, the company’s launching their issues in recent history have failed to attract investors at large.
The reason behind this could be the multiples factors such as pricey valuations, loss-making business, muted fundamentals of the company and profit booking.
The Indian Primary market has now reached a scale where it can be sustained at a certain threshold even though cyclical trends and short-term shocks continue, said Varun Sridhar, CEO,
Money.
While investing in an IPO, investors should focus on the long term story and understand the fundamentals of the company, their risk appetite and risks associated with the company and its business, he added.
Market experts are expecting the ongoing correction to last in the near-term and primary markets to remain under pressure for quite some time. They are suggesting investors hunt for value among the beaten-down names in the broader markets.
“We believe that listed stocks have better opportunities now and that investors should look at already listed stocks rather than IPOs for deploying their money,” suggests Shenoy from CapitalMind.
However, Singhania from TradeSmart is not gung ho over the IPO space. “The recent interest rate hike has dampened the sentiment for IPOs, but apart from that, SEBI clamping down on IPO funding has affected subscriptions,” he said.
