Fundraising via IPOs, QIPs poised to scale fresh peak in 2017
India’s capital markets are expected to end the year with IPOs and QIPs adding up to Rs90,000-100,000 crore, an all-time high
Mumbai: India’s capital markets are expected to end the year with initial public offerings (IPOs) and qualified institutional placements (QIPs) adding up to Rs90,000-100,000 crore, an all-time high.
On the IPO front, five mega insurance offerings are expected to collectively raise as much as Rs40,000 crore by the end of the year. State-owned General Insurance Co. of India Ltd and New India Assurance Ltd, which have both filed their draft IPO papers, are expected to raise Rs10,000 crore each. SBI Life Insurance Co. Ltd and ICICI Lombard General Insurance Co. Ltd, too, have filed their papers to raise around Rs7,000 crore and Rs5,000 crore, respectively. Another billion-dollar-plus IPO—HDFC Standard Life Insurance Co. Ltd—is expected to be filed soon.
All these offerings are expected to open during September-November.
These five initial share sales themselves will push 2017 to being the largest IPO year ever. The previous record stands at Rs37,534.65 crore, set in the year 2010 when 64 companies went public, data from primary market tracker Prime Database shows.
Already, 15 companies have raised Rs12,589.9 crore through IPOs this year. In 2015 and 2016, a total of 47 companies raised Rs40,107 crore.
Meanwhile, QIPs are already close to breaking the Rs34,675.75 crore record set in 2009. So far in 2017, 17 companies have raised Rs34,181.56 crore in QIPs, data shows.
With large issuances such as Bajaj Finance Ltd’s Rs4,500-crore QIP and Piramal Enterprises Ltd’s Rs5,000-crore offering in the pipeline, the number will only rise.
According to market experts, given the recent trends, there clearly is enough appetite to absorb these large share sales.
“Fundamentally, there is a strong appetite and there is enough money in the market to absorb large issuances,” said Harish H.V., a partner at Grant Thornton India Llp.
The strong performance of the primary market stems from the recent performance of stock markets and the inflow of both foreign and domestic capital into the capital markets.
So far this year, the Sensex has gained 18.1%, while in 2016, it rose only 2%. Foreign institutional investors have pumped in $8.76 billion to buy equities this year as compared to just $2.9 billion of equities last year.
Net inflows in mutual funds in the fiscal year ended 31 March rose 156% from a year earlier to Rs3.43 trillion, the highest since at least 2005-06, according to data from Association of Mutual Funds in India.
“Investments are moving to the stock markets as they have delivered better returns, while asset classes such as real estate and gold have taken a beating. Interest rates, too, are down and, therefore, fixed income assets, too, are relatively less attractive,” said Harish.
According to Premal Doshi, managing director at Ambit Capital Pvt. Ltd, investor interest in the IPO market is high due to companies from new sectors coming to the market and the quality of companies coming to the market.
“Companies in new sectors are now getting listed which were hitherto not listed like insurance, small finance banks and a varied set of other services businesses. Besides, there are also companies with niche businesses getting listed where there are no other listed peers,” said Doshi.
Most of the companies that are hitting the market with their IPOs are private equity-backed companies; so, the level of corporate governance is higher, compared with what has been seen historically, he said.
“Also, the average issue size has gone up, which is a result of more mature companies coming to the IPO market,” Doshi added.
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