Firms line up public offerings, buoyed by market optimism
As many as 24 firms, including Thyrocare Technologies and Ujjivan Financial Services, are waiting to launch initial public offerings
Mumbai: The success of recent initial share sales and optimism in the secondary market are encouraging several companies to go public.
Twenty-four companies with regulatory approval are waiting to launch their initial public offerings (IPOs). Among these, small finance bank licensee Ujjivan Financial Services Ltd and diagnostics firm Thyrocare Technologies Ltd plan to launch their IPOs in the week beginning 25 April, said four people familiar with the development, all of whom requested anonymity.
Executives of six more companies are conducting roadshows for investors and are in advanced stages to launch issues this quarter, they said.
Ujjivan, which is hoping to follow the success of Equitas Holdings Ltd’s IPO earlier this month, is looking to sell shares worth Rs.900-1,000 crore, including new shares worth Rs.600-650 crore, said two of the people.
Bengaluru-based Ujjivan will have to ensure that overseas shareholding in the company remains at or below 49%—as was the case with Equitas—to meet one of the conditions set by the Reserve Bank of India (RBI) to become a small finance bank.
When Ujjivan filed its draft proposal with the Securities and Exchange Board of India (Sebi) on 31 December 2015, foreigners owned 90.57% in the company. It received Sebi’s approval for the IPO on 25 February.
In the case of Thyrocare, existing shareholders are looking to sell 10.74 million shares through a secondary offering estimated at Rs.400-500 crore. The firm filed its draft prospectus with Sebi on 31 December and received clearance on 24 February.
The Navi Mumbai-based operator of pathology laboratories was looking to list its shares last year, but the issue hit a roadblock after the company was found to be non-compliant with the Companies Act. Mint reported on 26 May 2015 that the Thyrocare management had requested clarification from Sebi in connection to the shares issued to about 51 people about 10 years ago.
The Companies Act, 1956, did not allow an unlisted company to allot securities to more than 49 investors during a financial year. The clause was relaxed in the Companies Act, 2013, wherein the cap was increased to 200 investors.
Merchant bankers said the success of Equitas’s IPO and Infibeam Inc. Ltd’s in the first week of April have paved the way for future share sales. The Rs.2,176 crore Equitas IPO saw a subscription of more than 17 times.
Shares of Infibeam, a business-to-business online market place gained more than 3% on debut and are now trading 17.1% above the issue price of Rs.432, which itself was considered expensive at a time when the valuation of e-commerce companies appear stretched.
“The IPO market is seeing momentum and we see good appetite for new issuances. The rally in secondary markets is also encouraging and positive for IPOs and equity deals,” said Pranjal Srivastava, head of capital markets at ICICI Securities Ltd, which is managing 14 IPO mandates so far, according to Prime Database, a primary market tracker.
The benchmark Sensex has risen about 11.6% since mid-February in a post-budget rally, recovering half of the 23.55% fall from its all-time high of 30,024.74 in March 2015.
In the last three sessions alone, the 30-share gauge has advanced 1,000 points, or 4%, to reach its highest in more than four months on signs of easing inflation and the weather department’s forecast of above-normal showers this year after two consecutive years of deficient rainfall.
Emails sent to Ujjivan and Thyrocare on Friday were not answered at the time of going to press.
Satyen Shah, executive vice-president and head of equity capital markets, or ECM, at Edelweiss Investment Banking, an arm of Edelweiss Financial Services Ltd, said that the prospects of a good monsoon this year has cheered the markets, but advises investors not to get carried away.
“Indian markets saw good IPOs in the past few months and the pipeline remains strong going forward. Many companies are getting ready and preparing for IPOs based on the success of past issues, as well as the strength in secondary markets. With good monsoons and higher economic growth, we expect 2016 to be similar to or better than 2015, with some large-sized good quality issues,” Shah said.
In 2016 so far, seven companies have sold shares to the public to raise Rs.3,200 crore. Last year, 21 companies raised Rs.13,614 crore through IPOs, the best since 2010, data from Prime Database showed.
Mint reported on 15 April that 198 out of 292 firms listed over the past decade saw their shares perform better on their listing day when compared with the returns given over a one-year period.
The chief of a top domestic investment bank also said that he was bullish about the prospects of the ECM and investment banking industry in India but observed that deal launches are getting clustered.
“ECM is getting more seasonal now and in contrast to the IPO launches seen about five-six years ago. You will now see the trends where IPO markets are active for four months and passive or inactive for one-two months,” he, said requesting anonymity due to the firm’s compliance rules.
Indeed, data since early 2015 suggest that. Three IPOs were launched in March 2015. Then followed a one-month gap before the launch of four more IPOs from mid-April to early May 2015, stock exchange data showed.
A similar trend has occurred with 22 more IPOs since June 2015, data showed.