IPO filing hits century this year amid favourable market conditions

Mobilisation by way of initial offerings is already near the 2017 record tally of Rs 67,147 crore

The number of companies filing their draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) has crossed the 100-mark, highlighting the rush among companies to go public amid favourable market conditions.

The latest firms to file draft papers of their initial public offerings (IPOs) are Softbank-backed Oravel Stays, which operates OYO Hotels, and Adar Poonawalla-backed Wellness Forever, which operates retail pharmacy stores.

IPO filing has gathered pace in recent months amid the ebbing of Covid-19 infections and ramp-up in the vaccination rate. 28 DRHPs were filed with Sebi in August and another 21 in September, shows the data compiled by PRIME Database.

Already, mobilisation by way of IPOs has neared the 2017 record tally of Rs 67,147 crore. This year so far, around 40 companies have raised close to Rs 64,000 crore.

Companies that have filed their DRHP since July are looking to raise over Rs 1 trillion. This number may double after insurance giant Life Insurance Corporation of India (LIC) launches its offering. 

Fundraising via IPOs this year has been dominated by secondary share sales, mainly exits by private equity (PE) investors or selling by promoters. “Past several years of PE investments are finding their way to exit this year. As a result, the IPO activity we are seeing this year is more secondary-oriented,” said Sumit Jalan, co-head of India Investment Banking & Capital Markets at Credit Suisse.

 The unique aspect this year has been start-ups looking to go public. In July, food delivery firm Zomato became India’s first start-up to list. Its Rs 9,375-crore IPO had garnered bids worth over Rs 2 trillion and its stock is currently up more than 80 per cent over its issue price.

Paytm, Nykaa, and Paisabazaar are some of the other start-ups looking to go public.

“The recent tech IPOs have not just introduced a sector to investors, they have also introduced the concept of high growth, cash-burn-oriented businesses which are well understood by the capital markets, as well as by private investors. Such deals open up listing options, and also help uplift the entire ecosystem of tech, start-ups, and investments in the country,” said Jalan.

On average, 40 DRHPs are filed with Sebi each year. The record for most filing in a year is 160 in 2006, followed by 121 in 2007.

Some see the record number of IPOs as a sign of the markets getting overheated. In 2008, the benchmark Sensex had dropped 52 per cent following the global financial crisis. In the previous year, 100 companies had raised Rs 34,179 crore, a record back then.