For CY2016, nearly 10 companies have nearly garnered over Rs.7,300 crore so far. Today, Mahanagar Gas will announce its initial public offering (IPO). The joint venture between GAIL India and Royal Dutch Shell Plc is planning to raise Rs.1,200 crore. GAIL and Shell will sell 12.5% stake each in the proposed IPO.
It is pertinent to note that 2016 faced several headwinds on economic front that dented the growth of India Inc to a major extent. Despite the weak global economic cues, benchmark Sensex and Nifty offer 0.86% and 1.8% return respectively. Outpacing the benchmark indices, 7 of 10 IPOs offer significant return between 4-72% so far in 2016 at a time, when BSE IPO index has fallen by 4.5%.
Furthermore, the kind of overwhelming response received by most of the IPOs in 2016 clearly indicates that primary market has defied global economic woes, including sliding crude oil prices, weakening Indian rupee against the US dollar, squeezing macro economic data, heavy FII offloading in shares.
Analysts opine that investors in India are somewhat refrained from safe investment tool like gold, due to the unprecedented surge in the precious metal’s price that has helped the IPOs witnessing more retail as well as institutional participation. IPOs of Thyrocare Technologies, TeamLease and Ujjivan Financial were subscribed 73, 66 and 41 times respectively.
The show stoppers
If 2015 was dominated by healthcare companies like Dr. Lal Pathlabs and Alkem Laboratories, 2016 saw diagnostic chain Thyrocare Technologies’ IPO offering 35% return over its issue price of Rs.446 a share; and Narayana Hrudayalaya trading 27% higher than its IPO price of Rs.250. However, Ujjivan Financial leads the chart with 72% return over its issue price of Rs.210. The scrip got listed on May 10,2016.
The Chennai-based small finance bank (SFB), Equitas Holdings, has taken the investors to cloud nine with an impressive return of 58% over its IPO price of Rs.110. Among other IPOs, the Ahmedabad-based e-commerce firm Infibeam Corporation offers 34% return, while dairy products major Parag Milk and staffing services provider TeamLease offer 9% and 4% higher returns respectively.
The Weak IPOs
The IPO of Healthcare Global Enterprise (HCG), India’s largest cancer-care chain, was subscribed 1.56 times by the retail investors, but the issue currently offers negative return of 17% over its issue price of Rs.218 at which the company raised nearly Rs.650 crore. Similarly, anti-virus services provider Quick Heal Technologies’ IPO disappoints the investors with -21% return despite it was subscribed 11 times. Precision Camshaft is trading 27% lower that its issue price of Rs.186 a share.
What’s in the store?
Despite the post budget rally losing its charm on Dalal Street, the robust IPO pipeline for the current fiscal only adds to investors’ joy. With telecom major Vodafone expected to submit the IPO papers with market regulator Sebi in September and many others being in the pipeline, the golden run of IPOs is expected to continue. The stock market regulator has given its nod to as many as 25 companies, which are likely to mop up nearly Rs. 15,000 crore. L&T Infotech is expected to raise Rs.2,000 crore, AGS Transact (Rs.1,350 crore), Nuziveedu Seeds (Rs.700 crore), Paranjape Schemes (Rs.600 crore), Matrix Cellular (Rs.500 crore), among others.
Sebi eased IPO norms in the interest of investors, but companies too have found them helpful in IPO fund raising. The long term bullish outlook of Indian equity markets has underpinned corporate enthusiasm to raise capital through IPOs. The robust IPO pipeline aptly reflects the positive undertone in the primary market.