Shares of cold chain company Snowman Logistics Ltd surged on the first day of trading on Friday, reflecting increased investor interest in new offerings, but analysts are wary of interpreting the success of recent listings as a revival of the primary markets.

Snowman Logistics raised 197 crore from the sale of 42 million equity shares in the initial public offering (IPO), which was subscribed 60 times. Shares in the company, promoted by Gateway Distriparks Ltd, jumped 67.55% on debut to close at 78.75 on BSE from the offer price of 47 apiece.

Gateway Distriparks owns 54.1% of post-IPO equity in Snowman Logistics, while Norwest Venture Partners VII-A Mauritius holds 10.3%, the World Bank’s International Finance Corp. arm controls 9.27% and Japan-based Mitsubishi Corp. holds 9.4%.

Proceeds from the IPO will be used to set up new temperature-controlled warehouses, as long-term working capital, and for general corporate purposes, the company said in its prospectus. It is an integrated temperature-controlled logistics services provider with 23 warehouses across 14 locations in India.

Snowman Logistics is the first company to tap the primary market since the new government took charge in May with a promise to boost slowing economic growth by kickstarting stalled projects and investing in infrastructure to create jobs.

A rally in the equity markets this year has prompted several companies to line up share sales. Crop protection chemical company Sharda Cropchem Ltd concluded its 352 crore IPO on 9 September after receiving demand for nearly 60 times the shares it offered. Shemaroo Entertainment Pvt. Ltd is set to open its 120 crore share sale on 16 September.

Companies like Ortel Communications Ltd, Monte Carlo Fashions Ltd, Lavasa Corporation Ltd, Adlabs Entertainment Ltd and GMR Energy Ltd have all filed share sale documents with the Securities and Exchange Board of India (Sebi), but are yet to firm up their plans.

“The recent couple of IPOs were small in size and therefore can’t be taken as signals of revival. Real test is when large-size IPOs, say above 2,000 crore, with good valuations succeed in the market," said Prithvi Haldea, chairman and managing director of Prime Database, a New-Delhi based market tracker.

What may help upcoming primary market offerings is the renewed interest of retail investors in the equity markets. The retail portion of the Snowman Logistics IPO was subscribed 41.3 times while the non-institutional investor segment comprising of corporate entities and high net worth individuals was subscribed 221.8 times.

The strong performance of recent listings may have also helped draw investors. Wonderla Holidays Ltd, which raised 180 crore through its IPO and listed on 9 May, saw a 32% jump on debut. Since then the stock is up 73.51%. Local search engine Just Dial Ltd, which listed on 5 June 2013, has surged 218.91% since its listing.

“The data suggests that retail investors have turned their interest towards equities—both secondary and primary But again, it’s a long way to go, and there is still much more leeway for them to move from traditional investment products to equities," said Gautam Chhaochharia, head of India Research at UBS Securities India.

To be sure, while the IPO fund raising has picked up, it remains well below the levels seen in earlier years. According to data from Prime Database, in 2010, companies raised more than 37,000 crore from the primary markets. This fell to a low of 328 crore in 2013, shows the data. In 2014 so far, 378 crore has been raised via IPOs.

“It is still early to say if it is a revival, as we haven’t seen a flood of issues or many big issues hitting the market. People are waiting for more confidence, and may be that could come in after we see more such blockbuster responses," said Chhaochharia of UBS Securities.

Close