The initial public offering (IPO) market is ready for a breakthrough as companies advance their listing plans to cash in on the boom in the secondary market.
Sources say half a dozen issuers are looking at launching their offerings in the next four to six weeks to raise as much as Rs 10,000 crore.
RailTel Corporation of India, Burger King, Brookfield India REIT, HomeFirst Finance Company, and Kalyan Jewellers are among the companies looking to tap the market.
Many companies are eager to revive their nearly shelved IPOs since resurgence in the market offers them a fresh stab at the market. China's Fosun Pharma-led Gland Pharma on Wednesday concluded its Rs 6,480-crore IPO.
The benchmark Sensex has rallied 10 per cent in just eight trading sessions this month. The index has extended its gains from Covid-19 lows in March to nearly 70 per cent. This month’s rally in particular has been fuelled by the optimism around the US election result and the progress in clinical trials for Covid-19 vaccine. Foreign portfolio investors have pumped in more than Rs 20,000 crore into stocks this month.
The liquidity gush, coupled with favourable valuations, is seen as a major boost for companies ready with approvals but waiting on the sidelines to launch their IPOs. Also, the recent corporate earnings and trends of recovery in the goods and services tax collection figures have pushed up confidence levels.
Eight companies had hit the market with their IPOs in September. However, the activity slowed down in October as companies went into a wait-and-watch mode ahead of the elections in the US - an important market to determine the success of any fundraise.
"The US portion of the book, which needs to be subscribed in the IPO, has a lot to do with the emerging market (EM) allocation that those investors will keep at any point in time. If the EM appetite itself goes down, it has an impact on the demand for these issues. The US investor sentiment is significant once you start the roadshows because they give you that delta," said Skanda Jayaraman, managing director (MD) and head of investment banking, Spark Capital.
Bankers further said there was fear that markets could swing either way after the US elections.
"A lot of what happens in the Indian markets is a reflection of what is happening in the US. The companies want to avoid election-related uncertainties," said Rajendra Naik, MD, Centrum Capital.
Bankers said that a lull in the IPO market is not untoward during election months. "One sees a similar trend in India as well in the months preceding the general elections," said Pranav Haldea, MD, PRIME Database.
Not even a single IP0 hit the markets during the last three phases of the Lok Sabha elections in 2019.
However, the US election result has proved to be a tailwaind for equity markets. Analysts are seeing the outcome — with Democrats in the White House and Republicans holding the Senate — as the best-case scenario for the equity markets.
Experts say while the current market conditions are conducive to IPOs, one has to look at the preparedness as well. Launching an IPO is a protracted process and one that requires months of planning.
Investment bankers say a meaningful pick-up in the IPO market can only be seen in the first half of next year.
"Companies planning to come out with their issues after the US elections had filed their documents long ago. We could see more companies hitting the market from January 2021 onwards," said Naik.
Apart from the US elections, the way the Covid-19 situation pans out in India and the rest of the world will be keenly watched by investors.
There is a second wave of Covid in the US and Europe. Even though there is a decline in India as far as Covid-positive cases are concerned, there are worries about a surge after the festival season. Businesses demonstrating resilience to the pandemic will be looked at favourably, say experts.