Bullish sentiments in the secondary market and robust liquidity helped this buoyancy in IPO mart.
However, this financial year has been a tepid affair for this segment of the securities market this far, as activities have dried up amid the Covid second wave.
Macrotech Developers, erstwhile known as Lodha Developers, is the only issue to have hit the market so far this financial year. Many other companies are sitting with IPO approvals but are showing reluctance to go public.
Sona Comstar, Seven Islands Shipping, Dodla Dairy, Arohan Financial Services, Krishna Institute of Medical Sciences, India Pesticides are some of the companies standing in the IPO queue with the requisite Sebi approvals, but none has initiated the process so far.
V Jayasankar, Senior Executive Director & Head (ECM) at Kotak Mahindra Capital Company, said fiscal 2021 ended on a weaker note, leaving a perception that the IPO returns are reducing.
But he is confident things will start moving soon. “Due to the second wave of the Covid-19 pandemic, there has been a brief pause in primary market activity, but it should resume soon,” Jayasankar said.
About one-and-a-half dozen recent IPOs came from sunrise industry sectors such as speciality chemicals, automation, financial services besides IT.
Most of these stocks have delivered handsome returns to investors since their listing. Analysts expect similar trends to continue this year.
Manish Jain, Fund Manager, Ambit Asset Management, is still positive on BFSI as a high growth sector. He is also bullish on the discretionary consumption, auto and chemicals space.
Fund managers believe once the second wave peaks out, the primary market will get its mojo back. Market watchers expect companies to fast-track their issues as soon as market sentiments improve.
“We expect several new-age technology, healthcare and financial service firms to hit the market,” said Jayashankar.
Last financial year’s most rewarding IPOs included Happiest Minds, Chemcon Speciality Chemicals, Route Mobile, Burger King, Mrs. Bectors Food, Indigo Paints, Mtar Technologies, which doubled investors’ wealth on the listing day. The average listing gains from the IPOs of 2020 stood at 61 per cent, best since 2007.
Out of 30 listings of last financial year, only eight were listed at a discount. This shows companies had left something on the table for investors. However, many believe smaller issues, the greed to mint a quick buck in the primary market and very high liquidity were the key reasons behind such stellar gains.
“Companies and investment bankers should be careful while pricing issues, so that investors make optimal listing gains,” said Jayashankar.
“Listing gains help IPO market sentiment. Smaller issues may give robust listing gains, but can be prone to wealth erosion if market sentiments turn sour,” he said.
The list of potential IPO candidates is long. Those waiting at Sebi door for issue clearance include Fincare Small Finance Bank, Nuvoco Vistas, Chemplast Sanmar, Zomato, Aditya Birla Sunlife AMC, Glenmark Life Sciences, Shriram Properties, Jana Small Finance Bank, Tatva Chintan Pharma, Clean Science and Technology, Exxaro Tiles, Rolex Rings, Paras Defence and Space Technologies, among others.
Supposing most of them are able to get the go-ahead from the market regulator, as is the trend, India’s primary market is headed for the very busy season once the Covid crisis ebbs and economic conditions look up again.
While that promises bonanza for primary market investors, market watcher say one must look at the management and promoter integrity, and past performance of IPO-bound companies before jumping into the subscribe these issues.
Companies and sectors with better growth potential can be good choices, they say.
“Investors must understand that quality always pays in the long run, even if it comes at a price,” said Jain of Ambit Asset Management. “Financial discipline and homework about a company’s business and finances is of utmost importance. Swim against the tide – be greedy when everyone is fearful and vice versa,” he said.