Mumbai: The initial public offering (IPO) market is gearing up for a burst of activity, with at least 12 companies planning to raise more than Rs17,000 crore over the next two months, after a quiet start to the June quarter.
Experts attributed the introduction of the new Indian accounting standards (IndAS) as one of the reasons why IPO-bound companies have not approached the market so far this quarter.
“Companies now have to move to the IndAS from the Indian GAAP (generally accepted accounting principles). So, for the fresh numbers that companies will put in the documents, they have to be audited under the IndAS and also the past stated numbers have to be stated according to the IndAS," said Girish Nadkarni, managing director at Motilal Oswal Investment Advisors Pvt. Ltd. “That is taking some time which is why you are seeing less activity post-March."
All companies, including unlisted ones, having net worth of between Rs250 crore and Rs500 crore have to prepare their financial accounts for the year ended 31 March 2018 as per the IndAS accounting standards. Companies with net worth of Rs500 crore or more had to implement the new standard a year earlier.
With several companies preparing to launch initial share sales, activity is expected to pick up in the coming weeks as the primary market outlook continues to remain healthy, experts said.
“The pipeline in the June quarter will be very healthy. The market/IPO outlook continues to be strong and robust for the next two quarters if not the entire year," said V. Jayasankar, senior executive director and head of equity capital markets at Kotak Mahindra Capital Co. Ltd.
Several major IPOs, including those of HDFC Asset Management Co. Ltd, auto parts maker Varroc Engineering Ltd, non-banking financial company IndoStar Capital Finance Ltd, microfinancier CreditAccess Grameen Ltd and women’s apparel maker TCNS Clothing Co. Ltd, are set to hit the market this quarter.
Other companies that may launch their IPOs in the quarter include seafood exporters Devi Seafoods Ltd and Nekkanti Sea Foods Ltd. Both said they would decide on the timing of the launch after they get regulatory approval for their respective share sales. Reliance General Insurance Co. Ltd declined to comment. Emails sent to other firms cited above went unanswered.
In the first quarter of 2018, 14 companies raised a total of Rs18,591 crore through the IPO route, a more than fourfold increase from the Rs4,185 crore raised by five companies in the same period a year earlier, according to data from primary market tracker Prime Database.
In 2017, 64 companies tapped the IPO market to raise Rs67,147.4 crore, data shows.
According to Jayasankar of Kotak Mahindra Capital, 2018 is expected to be a better year in terms of total number of public offerings to hit the market.
“In terms of number of IPOs, 2018 will probably be even better than last year. In terms of size, you will not see the same large IPOs but the average IPOs will be very healthy. Last year, a few large insurance IPOs happened in the region of Rs6,000-11,000 crore, but that will be replaced by several IPOs in the region of Rs2,000 crore and above," he said.
IPO activity last year was dominated by large issuances such as HDFC Standard Life Insurance Co. Ltd, SBI Life Insurance Co. Ltd, ICICI Lombard General Insurance Co. Ltd, New India Assurance Co. Ltd and General Insurance Corp. of India Ltd, which collectively raised Rs43,760 crore.