Analysts See Lavasa Triggering IPO Market Revival

Green shoots have begun to appear in the primary market with filing of the first draft offer document with the Securities and Exchange Board of India (Sebi) since the new government took charge at the Centre and many others are expected to follow suit in the coming weeks, analysts say.

Resort town operator Lavasa on Tuesday filed its draft prospectus with the capital markets regulator for raising Rs 750 crore, becoming the first company to launch an IPO process since the swearing in of a new government headed by Prime Minister Narendra Modi on May 26.

There has been a sharp rally in the secondary markets with Sensex already scaling new peaks on a regular basis.

The landslide victory by the BJP-led National Democratic Alliance (NDA) in the general elections is widely expected to further perk up investor sentiment.

However, bullish trends in secondary market are yet to reach the primary market. Before Lavasa, the last IPO papers were filed with Sebi on May 22 (by Adlabs Entertainment).

Lavasa also happens to be only the third company to file IPO papers so far in the current fiscal year, the first being GMR Energy on April 3. GMR Energy later withdrew its plans.

According to market analyst, a pickup appears imminent in the primary market, which has been dormant for three years.

Adverse market conditions have forced 109 companies to call off their plans in the last three years to tap the capital market for raising Rs 52,500 crore.

Hindustan Construction Company (HCC) said on Tuesday its realty arm Lavasa Corporation will float a Rs 750 crore IPO.

This is second time Lavasa is filling a draft papers with Sebi for an IPO. It had planned to raise Rs 2,000 crore in 2010 but abandoned due to the weakness in the market.

"The announcement by Lavasa indicates that IPO market revival may be on the horizon. We may see many companies tapping the IPO route to garner funds in the coming months," CNI Research head Kishor Ostwal said.

"Benchmark indices, the S&P BSE Sensex and the CNX Nifty, have been making new highs, confidence among institutional investors is back," said Alex Mathew, head of research at Geojit BNP Paribas Financial Services.

"This is the right time for companies, which are looking to tap the IPO market," Mr Mathew said, adding that the "valuations should be attractive".

SMC Global research head Jagannadham Thunuguntla said the positive sentiment in the capital market since the start of the year has failed to revive the IPO market.

Last month, Emcure Pharma withdrew a proposed its initial public offer. This was the fourth withdrawal this year.

Prior to Emcure, three firms - Trimax IT Infra and Services, BSCPL Infrastructure and GMR Energy had withdrawn their respective public offer plans this year so far.