Indian companies continue to line up for initial public offerings despite the covid-19 pandemic slowing down primary market activity from its first quarter boom.
Companies filed draft red herring prospectuses (DRHPs) for nine IPOs that aim to raise almost ₹19,660 crore (approximately $2.66 billion) since 1 April 2021, according to data from primary market tracker Prime Database.
The primary market has hit the pause button. While 16 companies launched their IPOs in the first quarter of the calendar year, there was only one listing—that of Macrotech Developers Ltd—in April.
According to bankers, companies that were working on their IPO plans have not held back and are continuing to file DRHPs so that they are ready when the second wave of the pandemic abates and markets are more conducive to IPOs.
“In the last three months a very strong IPO pipeline has built up. The filings that we saw in the last few weeks are all companies that have been working on their draft prospectuses for the last three-six months. While work on new deals has gone a little slow, companies that were in advanced stages are not looking to defer their IPO plans and continuing to file the prospectus," said a Mumbai-based investment banker, who did not wish to be named.
“Given the ongoing second wave of the coronavirus pandemic, the market will remain choppy but there will be windows of opportunity to launch deals, as we saw in March when nine companies hit the IPO market," the banker said. “So the idea is to file your document with the Securities and Exchange Board of India, get the regulator’s approval and wait for the markets to stabilize to launch your deal. You want to keep yourself prepared so that when the window opens, you can move quickly and launch your IPO," he added.
Companies that have filed their draft prospectuses with the market regulator in the last few weeks include Zomato Ltd, which plans to raise ₹8,250 crore; Chemplast Sanmar Ltd, which aims to raise ₹3,500 crore and Aditya Birla Sunlife AMC Ltd, which is planning to raise ₹2,000 crore.
“Many more companies are working on their documents and they will be filing soon," said a lawyer advising a couple of companies that are working on their IPOs, speaking on the condition of anonymity.
“Due to the ongoing second wave, the regulator is also taking longer to clear IPOs. So people want to file as early as possible so that they can get an approval in time and be prepared to tap any opportunity that arises in the next few months," he added.
According to Pranav Haldea, managing director of Prime Database, activity in the Indian primary market will remain subdued as long as the stock markets remain volatile on account of the pandemic.
“Primary markets are extremely sensitive in nature. It takes very little for them to shut down. You have seen a tremendous amount of volatility in the market and there is no direction in the market as there is uncertainty on the eventual economic impact of the second wave. The secondary markets have to first stabilize before we can see some deals getting launched," he said.
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