Active Stocks
Fri Dec 08 2023 15:59:53
  1. Tata Steel share price
  2. 129.2 -0.62%
  1. HDFC Bank share price
  2. 1,653.1 1.38%
  1. State Bank Of India share price
  2. 614 0.35%
  1. NTPC share price
  2. 285.25 0.42%
  1. ITC share price
  2. 449.15 -1.95%
Business News/ Markets / Stock Markets/  India's economic resilience causing a strong influx of IPOs, says Mahavir Lunawat of Pantomath Capital Advisors
Back Back

India's economic resilience causing a strong influx of IPOs, says Mahavir Lunawat of Pantomath Capital Advisors

India's economic resilience and its attractiveness as an investment hub are causing a strong influx of IPOs, with a strong pipeline of over $9 billion expected in H2 2024.

Mahavir Lunawat, MD of Pantomath Capital Advisors (Pantomath Capital Advisors)Premium
Mahavir Lunawat, MD of Pantomath Capital Advisors (Pantomath Capital Advisors)

Mahavir Lunawat, MD of Pantomath Capital Advisors believes India's economic resilience and its attractiveness as an investment hub are causing a strong influx of IPOs. In an interview with Mint, Lunawat said the IPO trend will continue in H2 2024, with a strong pipeline of over $9 billion. Edited excerpts:

What is driving the strong influx of IPOs in 2023?

Compared to most of the other major economies, India stands out distinctly as one of the bright spots in the world today. 

In the primary capital market, we have witnessed many successful IPOs. We are no longer dependent on foreign institutions, as domestic institutions demonstrate increasing depth and maturity. 

Moreover, 2023 was anticipated to be one of the prime years for IPOs, considering a long lineup. The strong influx of IPOs can be attributed to India's economic resilience and its attractiveness as an investment hub. 

IPOs have become an entry point for first-time investors to venture into public offerings for listing gains. The capital market also showed a strong performance, largely supported by domestic capital accumulation. 

Strong investor confidence can be seen in the secondary market, but it becomes even more evident in IPOs as new and interesting ideas come to the market.

Earlier very few sectors used to dominate the mainboard IPOs. However, in the recent past, there has been an upswing and we see IPOs from diverse sectors, such as small finance banks, biotechnology, supply chain management, apparel, jewellery, infrastructure, cable manufacturing, etc. What has led to this change?

With 1.4 billion people, India has the largest population in the world and as per the 2011 Census of India, tier II and tier III cities constitute 16.9 per cent of the urban population of India. 

These small towns and cities play a pivotal role in the economic activity of the nation. They are responsible not only for the large production of the country’s crops but also have a significant presence in the manufacturing sector. 

India is expected to have one of the lowest dependency ratios among regional economies for the next 20 years, making now the ideal moment to set up industrial, logistics, and technological infrastructure outside of major cities for global expansion. 

India’s economy has now evolved for the better and the rise of entrepreneurship has led to business creation across sectors, especially in manufacturing, consumer electricals, and EV space. 

Much of it can be attributed to Tier II and Tier III cities which are actively contributing towards reshaping the Indian economy beyond metros. 

Regions like Rajkot, Udaipur, Surat and Nagpur among other regions from Madhya Pradesh and North are emerging as core areas with high-potential companies.

(Exciting news! Mint is now on WhatsApp Channels. Subscribe today and stay updated with the latest financial insights! Click here!)

How are the pricing and valuations of upcoming IPOs and how are the sentiments amongst promoters and private equity players for taking companies public?

The current financial year is witnessing interesting IPOs and buoyant primary market activities. 

After a slow start in 2023, the IPO market picked steam after the new financial year started in April. 31 mainboard IPOs hit stock exchanges between April’23 and September’23 as compared to 14 IPOs during the same period in previous years. 

The IPO market has been buzzing this fiscal year. There have been fewer mega IPOs this year compared to last year, but a greater number of IPOs with smaller issue sizes. 

The most active sectors in recent IPOs include hospitality and construction, automotive and transportation, diversified industrial products, and real estate. 

Except for only four companies, every other IPO listed in this financial year gave positive listing gains. 

All the IPOs managed by Pantomath Capital on the mainboard during the year 2023, viz, Plaza Wires, Sah Polymers, Aeroflex Industries and Vishnu Prakash R Punglia (VPRP), got featured in the list of top 10 most rewarding IPOs of this fiscal so far. 

Aeroflex garnered the highest number of applications with more than 27 lakh applications. Pantomath has also closed another mainboard IPO, Plaza Wires on October 5 which has witnessed the highest subscription of over 160 times. 

Also Read: New long-term growth story in Asia is India, not China, says Chris Wood of Jefferies

We have garnered gross subscription (before rejection) of more than 43,000 crore in both the IPOs of Aeroflex and VPRP. This level of participation demonstrates the market depth and also the favour primary issuances get from investors. 

Notably, the subscription was fueled by institutional demand, which is even more encouraging. Besides, only eight of the 30 IPOs have given single-digit listing gains. 

The rest all gave double-digit listing gains, hinting at a positive sentiment amongst promotors and PE players to go public.

Do you expect the IPO trend of the first half to continue in the second half (H2) of the year?

Yes, the trend will continue in H2 2024, with a strong pipeline of over $9 billion, approved by capital market regulator Sebi, and another $6 billion filed with the market watchdog. The second half of fiscal 2024 looks promising for the primary market.

Also Read: Q2 earnings in line so far, expect limited changes to current earnings estimates, says Vinit Sambre of DSP Mutual Fund

A strong inflow of capital in the primary market may cause a temporary scarcity of liquidity in the secondary market. What are your views on it?

Primary market and secondary market go hand-in-hand. It may not be appropriate to compare these two segments from a liquidity perspective. 

Sometimes a mega offering could have a temporary impact on market liquidity but that’s a very temporary phenomenon. Moreover, we did not witness any mega IPO hitting the street, which could have a potential impact on market liquidity. 

The Indian market has been deepening tremendously and past trends may no longer be relevant for forthcoming trends, especially those relating to liquidity.

Also Read: Cautious of headwinds to domestic demand; inflation to average 5.7% in 2023, says Aurodeep Nandi of Nomura

What should retail investors consider before deciding to invest in an IPO?

IPOs generally attract quite a lot of media attention, some of which is done on purpose by the firm going public. 

IPOs are well-liked by investors due to their tendency to induce volatile price changes on the day of the IPO and shortly thereafter. 

Significant losses as well as significant gains might occasionally result from this. 

Investors should ultimately evaluate each IPO in light of their financial situation and risk appetite, as well as the prospectus of the company that is going public. 

Investors must not follow the herd. Moreover, informal market pricing must not be the criterion. 

Investors must read offer documents and other collaterals formally circulated by the issuer firm. It’s not a bad idea if investors consult expert investment advisors registered with Sebi, for investment advice.

Read all market-related news here

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 06 Nov 2023, 02:03 PM IST
Next Story footLogo
Recommended For You

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started
Switch to the Mint app for fast and personalized news - Get App