Market rally, liquidity drive up IPOs in FY21

After elevating over Rs 31,000 crore from the first market in fiscal 2020-21, Indian corporations have gotten the Sebi approval to boost round Rs 30,000 crore by means of preliminary public provide (IPOs) within the coming months.
Big IPOs within the pipeline embrace LIC, HDB Financial Services, NCDEX and ESAF Small Finance Bank. LIC alone is anticipated to boost round Rs 70,000 crore to Rs 1 lakh crore from the market within the third quarter of the following monetary yr.
According to knowledge obtainable with the inventory exchanges, 30 corporations raised Rs 31,277 crore by means of preliminary public choices (IPOs) in 2020-21, considerably increased than Rs 20,352 crore mopped up by means of 13 preliminary share-sales within the previous fiscal yr. As many as 14 corporations had floated IPOs in 2018-19 to boost Rs 14,719 crore and 45 main-board IPOs throughout 2017-18 collectively raised Rs 82,109 crore.
Apart from IPOs, 2020-21 witnessed Rs 15,000-crore follow-on public provide of Yes Bank. Companies from numerous sectors like jewelry, expertise, specialty chemical compounds, banking and monetary companies have made their solution to the IPO area in the course of the interval beneath evaluate. “As interest rates are at rock bottom and there is no intention of the Fed to increase rates in the near future, the excess liquidity in the system is a key catalyst fuelling the IPO frenzy,” mentioned Nirali Shah, Head- Equity Research, Samco Securities.
In truth, as per Prime Database, the variety of shares with first-day good points on Indian alternate debut was the best in not less than three years. As many as 18 out of the 23 IPOs to this point this yr noticed first-day good points — 78 per cent of inventory itemizing in FY21.
The pleasure in public points is because of liquidity however there isn’t a doubt that it could be the expansion which is able to drive the rally in a few of these shares.
“With the secondary market recovering, the primary market activity has taken a good pace wherein 23 companies have raised money via IPO route during July 2020 and February 2021. In 2021, already 8 companies have raised around Rs. 12,720 cr through IPOs and many companies are in line to get listed in the upcoming months,” mentioned Vinit Bolinjkar, head-research, Ventura Securities.
“If we analyse the companies that were listed during the above period, it can be seen that only quality businesses could get listed in the current environment. Out of the 23 IPOs that were listed, 19 of them have used the liquidity and valuations that were available in the market to monetise their own shareholding,” Bolinjikar mentioned. The shareholders of those corporations booked the earnings in the course of the bull market as they received increased valuations throughout this era.

The IPO chart in 2020-21 was led by Gland Pharma (about Rs 6,480 crore), Indian Railway Finance Corporation (Rs 4,633 crore), CAMS (Rs 2,240 crore) and UTI Asset Management Company (Rs 2,160 crore).
The greatest issue driving corporations to fund-raising by means of IPO is the bull run within the inventory market with the Sensex crossing the 50,000 mark. Excess liquidity and higher than anticipated financial restoration lifted the market sentiment and the identical was seen within the main market.

When the market witnessed a bull run within the current previous, a number of IPOs had lined as much as elevate funds from the market. The IPO queue is growing. “IPOs are taking away some liquidity from the market. More IPOs, especially big ones like LIC are in the pipeline,” mentioned inventory seller Pawan Dharnidharka. “An investor must be cautious in such situations and should invest in fundamentally strong stocks rather than trying to make quick money only through listing gains in any and every IPO,” mentioned an analyst.