Firms continue to file DRHPs with Sebi despite IPO lull

Mumbai: Despite a near freeze in initial public offerings (IPOs), the past two months have seen 19 companies filing their draft documents with the Securities and Exchange Board of India (Sebi), according to data from the markets regulator.

The filings add to a pipeline of 54 companies that have filed their draft red herring prospectus (DRHP), but are yet to launch their IPOs, Sebi data shows. In fact, only 12 companies, that have filed their DRHP this year, have been able to launch their IPO.

Companies that have filed DRHPs in the last two months include cables and consumer appliances maker Polycab India Ltd, cement maker Emami Cement Ltd, diagnostics chain Metropolis Healthcare Ltd and wealth manager Anand Rathi Wealth Management Ltd.

In 2018, 24 companies have raised ₹ 30,959 crore through their initial share sales, significantly lower than the 36 companies securing ₹ 67,147 crore in 2017, according to data from primary market tracker Prime Database. Some of these companies had filed their draft prospectus in 2017.

IPO activity was skewed towards the first quarter of 2018, witnessing 14 share sales, data shows.

Industry experts say the recent rush of IPO filings suggests that companies are hoping to cash in on the opportunity if markets recover early next year after the state assembly elections.

“The work on a lot of these IPOs would have started some time back when no one knew that this window will disappear. So when people have already spent a lot of time on preparing the document they would rather finish it and go ahead and file. If a window comes up then people would launch their deal,” said an investment banker who advises companies on IPOs, requesting anonymity.

According to Vikas Khattar, MD and head, equity capital markets, and financial sponsors group at Ambit Capital, companies filing for IPOs today, could hit the markets if state elections results and macros are favourable.

“It’s very difficult to accurately pinpoint a potential market window for launching an IPO in near future, as a host of external factors are going to be in play, such as crude prices, and the results of state assembly elections...Nevertheless, if the results of state elections are in-line with market expectations and macro conditions remain stable, one could probably witness a market rally in early 2019 that might help primary market sentiments also,” said Khattar.

Madhya Pradesh, Rajasthan, Telangana, Mizoram and Chattisgarh, are going to polls between November-end and early-December. The results will be announced on 11 December.