Covid winners gain in public share sale2 min read . Updated: 11 Sep 2020, 06:28 AM IST
- Several companies that are benefiting from the effects of the pandemic are expected to launch IPOs in the coming weeks
- Market experts say investors are rushing to subscribe to offerings because these issuers are experiencing positive tailwinds for their businesses due to the pandemic. A drought of local IPOs since March
Investors are lapping up initial share sales of companies that are seen to benefit from the wide changes in the business environment brought about by the coronavirus pandemic.
Initial public offerings (IPOs) of two companies that hit the market this week hold testimony to the buoyant investor sentiment for such companies even as the pandemic wreaks havoc on the economy.
Happiest Minds Technologies Ltd’s IPO, which closed on Wednesday, saw a total subscription of 151 times, while Route Mobile Ltd, which closes on Friday, has been subscribed 4.21 times so far. Both were fully subscribed on their opening day; a rare feat for most IPOs.
Investors took notice that Happiest Minds derives 97% of its revenues from digital IT services such as cloud, SaaS, security, analytics and IoT, compared to 30-50% for traditional Indian IT services peers. Meanwhile, Route Mobile is a cloud–communication platform provider, catering to enterprises, over-the-top (OTT) players and mobile network operators.
Market experts said investors are rushing to subscribe to such offerings because these issuers are experiencing positive tailwinds for their businesses due to the pandemic. A drought of local IPOs since March, leading to a pent-up appetite for them, is helping as well, they said.
“Where capital is being raised for growth and where covid has redefined the sector and the business is doing better, those companies are bound to see much more traction from investors in the IPO market," said Venkatraghavan S., managing director and head-equity capital markets at Equirus Capital.
Rahul Singh, chief investment officer-equities at Tata Mutual Fund, added that the fundraisings have now moved beyond banks which raised capital to prepare for worsening credit cycle. “Now we see the fundraising more as growth capital for the new sectors with tailwinds post covid, i.e. digital transformation, chemicals and electronic manufacturing," said Singh.
Several companies that are benefiting from the effects of the pandemic are expected to launch IPOs in the coming weeks. These include brokerage Angel Broking Ltd, registrar and transfer agent Computer Age Management Services Pvt. Ltd (CAMS) and specialty chemicals maker Chemcon Specialty Chemicals.
“Post covid, a lot of new investors have come into the stock markets and thus brokerages are seeing a strong momentum, which will help Angel Broking. CAMS, which provides back-end services to mutual funds, is also benefiting from this influx of new investors while specialty chemicals have become attractive as global companies look to reduce their dependence on China following the pandemic," said an investment banker, speaking on the condition of anonymity.
Pranav Haldea, managing director of Prime Database group, said more companies from sectors that have gained from the current crisis may file their draft share sale prospectus soon. “Other sectors which are in deep pain are likely to delay listing or drop IPO plans completely," said Haldea.