Share sales gather pace as mkt turns buoyant, valuations hit lifetime highs

Equity share sales are gathering pace underpinned by buoyancy in the secondary market with valuations hovering around lifetime highs. On Thursday, Indigo Paints, which is among India’s top five paint companies, announced its Rs 1,170-crore initial public offering (IPO). The announcement came a day after state-owned Indian Railway Finance Corporation (IRFC) set the dates and pricing for its Rs 4,500 crore offering. Meanwhile, the government also launched Rs 2,600-crore share sale in Steel Authority India (SAIL), which saw nearly two times subscription.
 

Investment bankers said more IPOs including that of Home First Finance Company, RailTel Corporation of India, Kalyan Jewellers India, Stove Kraft and Suryoday Small Finance Bank will be rolled out over the next three or four weeks.
 

The strong deal momentum comes at a time when the benchmark Sensex is just shy of the 50,000 mark. Also, investor appetite for IPOs is strong given the impressive performance of last year’s new listings.

“After a short year-end break we are seeing deal activity gaining momentum. With valuations across the board improving, it is quite an opportune time launch an IPO. Foreign portfolio investors, high networth individuals as well as retail investors are looking forward to new deals,” said an investment banker involved one of the upcoming IPOs.
 

IRFC will be the first issue to hit the markets in 2021. The issue opens on January 18. The government is looking to raise Rs 1,500 crore, while the railway financing firm will issue fresh shares worth Rs 3,000 crore. At the top-end of the price band of Rs 26, IRFC will have a market capitalisation of nearly Rs 27,000 crore.
 

Indigo Paints IPO too, will be a mix of fresh and secondary component. The Pune-based firm will raise Rs 300 crore of fresh capital and existing shareholders will offload shares worth Rs 870 crore. At the issue price of Rs 1,490, Indigo Paints will have a market cap of around Rs 7,000 crore and its IPO will open on January 20.
 

Experts said all the issues that are coming to the market are getting good valuation support as the midcap and smallcap indices also trading at record levels.

Share sales by listed firms too are generating good investors. SAIL’s 413-million share offer for sale (OFS) received bids for nearly 750 million shares. Most bids came at Rs 65.5, higher than the base price of Rs 64 set by the government.
 

Shares of SAIL, however, dropped 10 per cent in the secondary market trade to end at Rs 67.3.
 

“We are seeing strong investor demand for any share sales that are getting launched whether it is an IPO, OFS or large block deals,” said Dharmesh Mehta. Managing Director & CEO - DAM Capital Advisors.
 

In 2020, Rs 26,770 was raised by way of IPOs, a jump of two times over the previous year.  Overall equity fund raise stood at a highest-ever Rs 1.85 trillion.