IPO frenzy: 35 companies may raise Rs 80,000 crore in Q3

As many as 35 companies are planning to raise a record Rs 80,000 crore in the third quarter if the market remains stable, bankers said. In comparison, the previous record for a calendar year was in 2017 when 36 companies raised Rs 67,147 crore.

Paytm, Aadhar Housing Finance, Star Health & Allied Insurance, Policybazaar, Emcure Pharma, Adani Wilmar, and Nykaa are among those planning to raise between Rs 4,000 crore and Rs 16,600 crore in IPOs. Paradeep Phosphates, Vedant Fashions, CMS Infosystems, and Northern Arc are also expected to tap the market to raise Rs 2,000-2,500 crore in the December quarter, according to banking sources.

About 14 companies, including Paradeep Phosphates, Go Airlines, Ruchi Soya Industries, Arohan Financial Services, Utkarsh Small Finance and Fincare Small Finance, have already received approval from capital markets regulator, Securities and Exchange Board of India (Sebi), to raise around Rs 22,000 crore, while a further 64 companies have filed their draft red herring prospectuses.

Market participants said they were not worried about more money being funnelled into the primary market or diverted from the secondary market, which is hovering near record-high levels.

FPI Inflows

“With the kind of issues lined up, investors – including institutions – would deploy fresh money into IPOs rather than chasing the same listed stocks, and in fact, it would stop fuelling the asset bubble in the secondary market,” said V Jayashankar, head of equity capital markets, Kotak Investment Banking.

“Though there is a lot of liquidity in the market, investors will likely pick and choose from a large pool of companies that are planning to hit the primary market in the next few months,” he added.

Policybazaar and Nykaa are expected to launch their IPOs this month to raise Rs 6,000 crore and Rs 4,000 crore, respectively. Chennai-based standalone health insurance company Star Health also plans to launch its Rs 7,000 crore IPO later this month.

MobiKwik, Paradeep Phosphates, CMS Infosystems, Northern Arc, Sapphire Foods, and Tarsons Products may also launch their IPOs in October, while digital payments firm Paytm expects to list in November. The homegrown fintech firm, backed by China’s Ant Group and Japan’s SoftBank, has filed for a Rs 16,600 crore IPO that will likely be the largest ever in India. It is pending regulatory approval.

“The IPO euphoria is likely to continue in the coming months with ample liquidity, which could come from all sections of investors, including domestic and foreign institutions,” said Dharmesh Mehta, managing director and chief executive of DAM Capital. “However, every issue may not get a good response,” Mehta cautioned.

So far this year, 42 companies have hit the primary market, raising a record Rs 69,676 crore, data from primary markets tracker Prime Database showed.

Foreign portfolio investors (FPIs), which have invested a net Rs 38,000 crore, contributed to nearly 55% of the funds raised in the IPOs so far in 2021.

Out of 24 IPOs listed since April 1, 18 are trading above their offer price, while only six have seen negative returns.

Paras Defence, Ami Organics, Tatva Chintan Pharma, GR Infraprojects, Clean Science and Macrotech Developers have in fact doubled from their initial offer price.

Fund managers said the IPO rush will attract more inflow into the capital markets because of renewed interest from investors.

“Any new company with good business and a reasonable price will likely attract strong flows from mutual funds, insurance companies, FPIs, and even from retail,” said Gopal Agrawal, fund manager at HDFC Mutual Fund, adding that a strong IPO pipeline does not, however, have any material impact on the stock market because the MF industry is already witnessing significant inflows through Systematic Investment Plans and new funds.