Alkem, Dr Lal IPOs spark off Rs 30,000 cr of broker loans

Listings help revive demand at NBFC arms of brokerages

The successful Initial Public Offerings (IPOs) of drug maker Alkem Laboratories and diagnostic chain operator Dr Lal PathLabs have helped revive the demand for IPO loans, provided by NBFC (non-banking financial company) divisions of brokerages.

According to sources, NBFC arms of brokers such as Edelweiss, IIFL, JM Financial, Reliance Securities, Kotak Securities, and Aditya Birla Money, collectively did a business of about Rs 30,000 crore from the two IPOs, with Alkem contributing about two-thirds to the financing book. However, the recently-concluded share sale of private health-care service provider Narayana Hrudayalaya saw a tepid demand from HNIs (high-net-worth individuals).

IPO loans are typically availed by HNIs who are confident of a company listing at a significant premium, giving them the scope to exit the stock in the near future. The interest rates quoted for Alkem and Dr Lal were in the range of 7.5-8.5 per cent.

Alkem and Dr Lal had managed to mop up Rs 1,350 crore and Rs 632 crore through their share sales that closed on December 10. The issues were subscribed 44 and 33 times, respectively. Alkem’s share sale was subscribed 130 times in the HNI segment and nearly three times in the retail portion. Dr Lal’s share was subscribed 61 times by the HNIs and over four times by the retailers.

Both Alkem and Dr Lal made a strong debut on the bourses on Wednesday, ending with gains of 31.5 per cent and 50 per cent over their respective issue prices of Rs 1,050 and Rs 550. Accounting for the funding cost, HNIs made gains of Rs 150-160 in the Alkem issue and Rs 220-230 in Dr Lal on the day of listing, said experts.

“HNIs who availed of IPO financing have made gains in both these issues, even after accounting for the high cost of financing. Several investors are still holding on to the stocks despite robust gains on the first two days,” said Kamlesh Rao, chief executive, Kotak Securities.

In the two days since the shares got listed, Alkem and Dr Lal have gained 46 per cent and 63 per cent, respectively, on the NSE. Experts suggest investors in health-care IPOs are betting on an increase in demand for health-care services on the back of rising incomes in the country. The BSE Healthcare index is up more than 15 per cent in the past one year, compared with a six per cent fall in the benchmark Sensex.

Health-care firms Thyrocare Technologies, Healthcare Global Enterprises, and Aster DM Healthcare plan to go public soon.