Financial sector readies for IPO rush worth over Rs20,000 crore
New Delhi: The IPO market is heading for a heavy rush with a number of high-profile names including UTI Mutual Fund and SBI Life expected to launch their initial public offers amounting to Rs20,000 crore in coming months. State-owned general insurer New India Assurance and reinsurance firm General Insurance Corporation of India (GIC Re), as also HDFC Life are among the other names that may launch their share-sale offers.
Some of these companies have begun the process for approaching capital markets regulator Sebi with their draft proposals. While UTI Asset Management Company has been planning an IPO for a long time, a few of them such as SBI Life have already indicated that the share sale would take place this fiscal itself. The public sector general insurers are also expected to hit the market in the current financial year to help the government meet an ambitious disinvestment target of Rs72,500 crore.
Together, these companies are estimated to raise about Rs20,000 crore. So far no mutual fund has got listed in India, while ICICI Prudential Life Insurance became the country’s first listed insurer after its Rs6,000 crore public issue in 2016. State Bank of India (SBI) has got the board’s approval to “initiate process for offer for sale of 10% of shares through initial public offer” of SBI Life. Housing Development Finance Corporation (HDFC), in April last year, said it has “in-principle agreed to sell up to 10% stake held in HDFC Standard Life Insurance Company”.
Further, government is looking to sell up to 25% stake each in New India Assurance and GIC Re. UTI Mutual Fund’s IPO will allow partial exit for four sponsors – SBI, LIC, BoB and PNB – which own 18.5% each in it, while the remaining 26% is held by US- based investment firm T Rowe Price. As and when the IPO happens, UTI will be first fund house to be listed in the country. By taking the IPO route, the companies will achieve benefits of listing the equity shares on the bourses.
Besides, listing of the equity shares will enhance their brand name and provide liquidity to the existing shareholders. According to experts, the IPO market is expected to see some activity this year as half many companies have already filed their draft papers with Sebi in 2017 to launch public offers and many are awaiting the regulator’s nod. Also, proactive regulatory environment coupled with general uplift in investor sentiment has helped the IPO market.
Market watchdog Sebi has taken numerous steps that are encouraging companies to sell shares. One key enabler was making Asba (Application Supported by Blocked Amount) mandatory for all investors, including retail. Besides, Sebi’s proactive approach to the market has ensured that investors need not fear about frauds. Quantum AMC Director I V Subramaniam said: “Attractively priced IPO will get a solid response from investors as its chances of listing with gains get higher.
Conversely, if an IPO is over-priced, it may not be able to list attractively”. Last year saw 26 companies collectively raising over Rs26,000 crore trough their respective IPOs, making it the best in six years.