Companies queue up to raise over Rs 10,000 crore via IPOs

19 companies including Cafe Coffee Day, Matrix Cellular and RBL Bank have filed draft red herring prospectus with Sebi thus far in 2015

Nineteen companies, including IndiGoCafé Coffee Day, Matrix Cellular and RBL Bank, have thus far in 2015 filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi). Going by these figures, the amount raised via the Initial Public Offer (IPO) route this calendar year (CY15) is set to touch its highest level in the past five years. Fund mobilisation via public issues could cross Rs 10,000 crore.

Till now, eight companies have collectively raised Rs 3,850 crore through IPOs in these first six months of CY15, compared to Rs 1,201 crore during CY14, by five companies.

Staffing firm Teamlease, e-retailer Infibeam, GVK Airport Developers and L&T Infotech also planning to raise funds via public issues.

Café Coffee Day, Matrix Cellular and RBL Bank (formerly Ratnakar Bank) have filed DRHPs to raise Rs 2,750 crore through IPOs. Including these three, the 19 DRHPs filed would translate to Rs 11,000 crore through IPOs.

Explains Vinay Khattar, associate director and head of research at Edelweiss: “Since the market condition was not conducive over the past few years, promoters were delaying their plans of tapping the primary market. A lot of promoters now seek to unload a part of their equity holding in their company for expansion, etc, given the overall improvement in market condition.”

But, does the market have an appetite for fresh issues, given that the government plans to raise Rs 69,500 crore by divesting stake in government companies this financial year? The secondary market has also corrected. The S&P BSE Sensex, which touched a record high of 30,025 during intra-day trade on March 4, has since slipped 7.5 per cent or 2,245 points to 27,780 on Tuesday.

Experts suggest investors will pick up issues where they find value, irrespective of the sector. For this, the pricing of the issues will be key, beside the earnings outlook of the companies coming out with these issues. “Select IPOs thus far have seen a blockbuster response from investors in terms of subscription levels and also the prices, which have sustained in the secondary market. One needs to look at the kind of IPOs coming through and the business outlook of the companies. Investors also need to do a peer comparison, look at valuations, how will the issue proceeds be utilised (reduction of debt or expansion of business) and the revenue growth outlook before subscribing to these. I think companies operating in niche areas or have unique specialities will go well. For generic companies, pricing of issues will also be a key determinant for success,” said Mayuresh Joshi, vice–president (institutional), Angel Broking.

“As regards the government’s divestment programme, the appetite will be stock-specific. We might not get much response from the retail investors here but institutional investors will look to participate if the stocks are offered at a good price and the valuations look reasonable, since they are already sitting on a neat cash pile. Retail investors will only participate if they wish to stay invested for the long term,” he adds.