Year of record harvest for IPOs on Dalal Street

MUMBAI: India’s primary market is poised to set a record in terms of money raised through initial public offerings with Wednesday’s launch of the Rs 11,370-crore General Insurance Corp of India share sale, exceeding the previous high of 2010. This reflects confidence in the country’s economic prospects as the government continues with reforms and improved corporate earnings, experts said.

By the time the GIC Reissue closes, Indian firms would have raised about Rs 52,125 crore ($8.2 billion) through IPOs this calendar year versus Rs 37,535 crore in 2010, taking the country to the third spot behind US ($35.77 billion) and China ($34.8 billion).

GIC Re will be India’s third-biggest IPO after Coal India’s Rs 15,200 crore issue in October 2010 and Reliance Power’s Rs 11,700 crore share sale in January 2008.

The IPO market has expanded with an increase in size amid aggressive participation by domestic mutual funds, bankers said. “Attractive valuations have motivated many leading companies to plan IPOs giving investors an opportunity to invest in quality issues,” said Ravi Sardana, executive V-P, investment banking, ICICI Securities.

$20 b could be Raised in Current Fiscal
“It is heartening to see the rising share of Indian funds and investors in IPOs are insulating the issues from foreign volatility,” said Ravi Sardana of ICICI Securities.

SBI Life Insurance and ICICI Lombard General Insurance mobilised Rs 8,400 crore and Rs 5,700 crore, respectively, last month. Other big issues in the current calendar year include IPOs by IRB Invit (Rs 5,033 crore), India Grid Trust (Rs 2,250 crore), AU Small Finance (Rs 1,913 crore), Avenue Supermart (Rs 1,870 crore) and Eris Lifescience (Rs 1,741crore).

“As long as investors get good companies with reasonable valuations, this euphoria will continue,” said Axis Capital managing director Dharmesh Mehta.



This is also a record year for fundraising through qualified institutional placements (QIPs). About 20 companies have raised around Rs 39,682 crore so far in 2017, exceeding the previous high of Rs 34,676 crore in 2009.

Bankers expect more than $20 billion will be raised through IPOs and QIPs in the current fiscal, aided by strong flows from foreign portfolio investors (FPIs) and domestic institutional investors.

“New global funds, including pension and sovereign funds, have shown interest in investing in India of late through IPOs and QIPs on expectations of much better corporate earnings growth over the next couple of years aided by lower interest rates and continued bold reforms by the government,” said V Jayasankar, senior executive director and head of equity capital markets, Kotak Investment Banking.

According to merchant bankers, there is a rush from promoters and private equity players to enter India’s capital markets and many new companies are in discussions with bankers for mandates.

The stability in the market and huge inflows from domestic funds have led to an increased level of activity in the primary markets, according to merchant bankers.

“Across sectors there are enquiries from promoters and private equity funds on the issue process, valuation and market appetite,” said Ravi Sardana of ICICI Securities.

Nearly two dozen companies have already filed Draft Red Herring Prospectuses (DRHP) or secured the Securities and Exchange Board of India’s approval for IPOs, including New India Assurance, Reliance Mutual Fund, Reliance Insurance, HDFC Life Insurance, Mahindra Logistics and Future Supply Chain.