A drought in India’s initial public offerings might be easing with companies preparing to tap a buoyant stock market after investors piled into two recent sales.
A bunch of firms -- ranging from a drugmaker to a jeweler -- will likely test investor demand over the next few months, helping revive fundraising through first-time sales from the lowest in four years.
While Hong Kong and China have seen a flurry of new listings amid abundant liquidity, activity in India is seen picking up after IPOs from Happiest Minds Technology Ltd. and Route Mobile Ltd. last week lured hordes of investors keen to bet on companies expected to gain from rapid adoption of digital services.
“The primary market is a preferred way to play new ideas and that is why there is a rush for public offers,” said Mangesh Ghogre, executive director and the head of equity capital markets at Nomura India. “Investors believe there’s upside in the primary market.”
That belief prompted investors to bid for Happiest Minds 151 times over, making it one of India’s most successful IPOs of this decade. Route Mobile, a cloud infrastructure provider, was oversubscribed 73 times. The sales are a bright spot in a market that’s seen little over $2 billion being raised from IPOs in 2020, the least for the period since 2016, despite the 50% jump in the main equity indexes from the March lows.
“There is ample liquidity globally and as funds, especially the long only ones who were sitting on record levels of cash and had mostly stayed out of the rally, are now chasing performance through equity deals,” Sunil Khaitan, India head, Global Capital Markets at Bank of America, said in an email.
The IPO pipeline includes a spinoff of Gland Pharma Ltd. by Shanghai Fosun Pharmaceutical (Group) Co. that could raise as much as $800 million, according to people familiar with the matter. Kalyan Jewellers India Ltd., Computer Age Management Services, UTI Asset Management Co., Angel Broking Ltd. and the National Commodity and Derivatives Exchange Ltd. are also looking to list, according to PRIME Database.
“Investors are looking for exciting stories that have an edge and can capitalize on the current disruption,” said Amitabh Malhotra, head of investment banking at HSBC India. “We are seeing well-governed mid-cap companies come to the market across follow-on placements and IPOs.”