Drooling over LIC IPO? If you cash, plenty of options ahead

NEW DELHI: Indian IPO investors have been rewarded handsomely during the past quarter with a couple of spectacular listings, and investors are flocking to primary market in droves. Most of the recent issues have received astronomical levels of subscription.Taste of quick buck has now left IPO investors drooling over the prospects and potential of the proposed initial public offering of insurance behemoth LIC. Calendar 2021 has already seen five IPO so far, including those of IRFC, Home First Finance, Indigo Paints, Stove Kraft and Brookfeild India REIT. These companies have cumulatively raised Rs 11,175 crore.Some eight issues are in the queue to make market debut before the expiry regulatory clearance. Nureca’s Rs 100 crore IPO is set to open next week. Others on the list include Anupam Rasayan, Nazara Technologies, Craftsman Automation, Aadhar Housing, Railtel Corp, Laxmi Organics and Barbeque Nation.Primary market watchers are anticipating a blockbuster year in terms of new issues after a tepid show in FY2019-20 amid poor economic growth, US-Sino rift and liquidity crunch following the NBFC crisis. Sentiments are improving, and more companies are gearing up to hit the market to raise funds.Shares of some of the IPO aspirants are already performing decently in unlisted market, as the secondary market benchmarks almost doubled from their March lows. Opening up of the economy, improvement in high frequency growth indicators, better corporate earnings and optimism over the ongoing vaccination drive have helped boost sentiment.“The Budget focus on growth is likely to kickstart the capex cycle. The equity markets will emerge as a major beneficiary of the expansionary Budget and low interest rates. The laggards of last few years are gaining momentum,” said Neeraj Chadwar, Head- Quantitative Equity Research, Axis Securities.Investors pocketed an average of 42 per cent listing gains in 2020, against 20 per cent in 2019 and 6 per cent in 2018. IPOs launched in 2020 were subscribed 75 times on an average, compared to 32 times in 2019.Out of 13 IPO that hit the market in 2020, nine were listed at a premium. Burger King, Happiest Minds, Route Mobile, Mrs Bectors doubled investors’ money on the listing day. Barring IRFC, four out of the five issues of 2021 have got listed at a premium, with Indigo Paints leading the pack.“Due to the Covid-19 Pandemic, a lot of companies had to put their primary capital raising plans on hold. A lot of DRHPs were filed, but not many issues saw the light of the day. Now, with the economy opening up, primary market activity is back on track,” said Amishi Kapadia, Executive Director & Global Head, Merchant Banking at YES Securities.The recently-listed IPOs have largely been a success story, encouraging other promoters to hit the market. Also, they are bringing in fresh and niche business ideas to investors. Domestic primary market is expected to remain vibrant throughout this calendar. “As the broader market picks up pace, investors’ risk appetite has improved significantly. Midcaps and smallcaps are leading the rally after a prolonged underperformance,” Kapadia said.Advice for InvestorsDespite a hefty IPO season, a handful of recent IPOs were able to hold fort. Investors should be wary of valuations and business growth.”Investors must assess an issue on various parameters before subscribing to it. One should look at the nature of business, growth prospects of the company, management integrity, the reasons to raise capital and do the due diligence on the financials,” said Chadwar of Axis Securities.Kapadia of YES Securities said retail investors should put their money only in quality issues, those with strong corporate governance standards and growth potential will continue to do better.There is a long list of companies that are likely to aim for listing over the next two years. The list includes Suryoday Small Finance Bank, Zomato, Studds Accessories, Kalyan Jewelers, ESAF Small Finance Bank, National Stock Exchange, Annai Infra Developers, Bajaj Energy, NCDEX, Powerica, SAMHI Hotels, HDB Financial Services, TCIL, Grofers, among others.
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