2016 was a blockbuster year for the primary market in India. Twenty-six companies raised over Rs 26,000 crore – the highest amount raised via this route in six years.
The Stars Of 2016
Investors lapped up most primary market offerings with gusto. While the Advanced Enzyme Technologies Ltd. IPO was subscribed over 100 times (115.74x), public issues of RBL Bank Ltd. (69.5x), Mahanagar Gas Ltd. (64.51x) and Thyrocare Technologies Ltd. (73.24x) too saw healthy subscription.
But the star of the show was business service provider Quess Corp Ltd. – the issue was subscribed a whopping 147 times.
However, the primary market offers of the Larsen and Toubro subsidiaries – L&T Infotech Ltd. as well as L&T Technology Services Ltd. – failed to live up to the hype and saw tepid subscriptions. The IPO of ICICI Prudential Life Ltd. too met with a similar fate.
The Road Ahead In 2017
With offers worth Rs 6,500 crore already approved by market regulator Securities and Exchange Board of India, can 2017 be an equally promising year for the IPO market?
The sentiment, going into 2017, may be subdued on account of global uncertainties related to U.S. President Elect Donald Trump’s policies and the U.S. Federal Reserve’s interest rate guidance, as also domestic factors like the demonetisation and the subsequent cash crunch. Some of that caution may rub off on forthcoming IPOs as well, Daljeet Kohli, head of research at IndiaNivesh Securities said.
We don’t expect market sentiment to be very good in 2017. We expect it to be quite volatile. 2017 is expected to be a tough and volatile year. The basic idea is that one should find value in the IPO. Only then will it fetch you good returns.Daljeet Kohli, Head-Research, IndiaNivesh Securities
Concerns For 2017
Kohli believes that the timing of the IPO will be crucial in determining the subscription it receives. He expects companies to leave some value on the table for investors. Apart from demonetisation, he sees other concerns that could hamper the market in 2017.
Demonetisation is just one aspect that will impact the company earnings and the economy as a whole. International issues like foreign institutional investor outflows, the rally of the dollar among other currencies are some of the other issues that the investors will have to grapple with in 2017.Daljeet Kohli, Head-Research, IndiaNivesh Securities
India: The Jewel In The Crown?
Not everybody though, sees tough times for the IPO market in India in 2017. Consultancy firm EY expects India to remain the crown jewel of IPO activity in the Europe, Middle-East and Africa region in the coming year.
India is likely to remain the jewel in the crown of IPO activity in EMEIA in 2017. With a supportive political backdrop, upbeat economic sentiment, improved business confidence, easing inflationary pressure and stable foreign direct investment inflows, the pipeline is looking solid for 2017.EY Global IPO Trends Report
Listing Indices: Good Prospect?
Apart from seven companies with issues worth Rs 3,500 crore awaiting regulatory approval, investors are keenly awaiting the IPOs of India’s two equity exchanges – the National Stock Exchange of India and the Bombay Stock Exchange.
The NSE filed its draft prospectus, offering 20-25 percent shares to the public for an estimated Rs 10,000 crore while the Rs 1,200 crore issue of the Bombay Stock Exchange is also awaiting a nod from the regulator.
Kohli however, doesn’t seem too impressed with the idea of listing exchanges. He believes that it is difficult to find value in indices which can only do well on days when the volumes are high. But these offers stand to gain from the prospect of ‘scarcity premium’, he said.
Personally, I am not too impressed with the idea of the listing of indices. But they still get the valuation since people feel that they will get the scarcity premium. Fundamentally, I don’t find it appealing to buy any index stock. They will make money only when the volumes are higher. If volumes on the exchanges are higher, which means that the other stocks are doing well. If they are doing well, why should somebody buy the index itself?Daljeet Kohli, Head-Research, IndiaNivesh Securities
IPOs To Watch In 2017
Apart from the two indices, many mega IPOs are slated to open for subscription next year subject to necessary approvals.
The life insurance arm of India’s largest lender State Bank of India SBI Life Insurance, private airline Go Airlines, telecom major Vodafone India, and Avenue Supermarts, owners and operators of hypermarket and supermarket retail chain D-Mart are slated for 2017.
In addition, companies like Matrimony.com, VLCC, and Hinduja Leyland Finance had received SEBI’s approval for their primary market offers as early as 6-12 months ago but are yet to take the plunge.
RECOMMENDED FOR YOU
POPULAR