D-street flooded with IPOs even during pandemic

The capital markets have started the year 2021 on a high with a lot many companies deciding to go public through an Initial Public Offering (IPO). According to the Bombay Stock Exchange, so far in 2021, 18 companies have successfully come out with their IPOs, 12 on the main board and the rest on the SME segment.

At least over a dozen more companies are in the pipeline to list on the Indian stock exchanges. If all these companies list on the BSE, the number of companies would have crossed the level seen in the whole of 2020. As many as 31 companies came out with IPOs in 2020 with 14 on the main board and 17 on the SME board.

Some known names like Rail Vikas Nigam Limited, Kalyan Jewellers, EasyTrip.com are some of the companies that have listed on the Indian bourses in 2021. Data from the Securities and Exchange Board of India (SEBI) suggests that in January 2021 alone, Rs 4,933 crore were raised through IPOs while only Rs 31 crore was raised through IPOs in January 2020.

Read | Liquidity, IPO rush: How Indian companies fared in FY21

Not just that, data comparing December 2020 and January 2021 shows that during this time period itself there has been a multi-fold increase in funds mobilised by corporates from Rs 1,353 crore in December 2020 to Rs 4,933 in January 2021. These were on the main board of the BSE as well as the SME section.

Interestingly, the pandemic did not prove to be a dampener for the capital markets. Prime Database suggests that Rs 26,770 crore was raised through IPOs during the year of the pandemic as opposed to Rs 12,985 crore in 2019.

Among the big-ticket IPOs in 2020 were listing SBI cards and Gland Pharma. While SBI cards raised Rs 10,341 crore, Gland Pharma raised Rs 6,480 crore through IPO. Prime Database goes on to state that the average ticket size of the issues in 2020 was Rs 1,774 crore.

It seems that the momentum for 2021 was set in the last few months of 2020. Out of the 14 main board IPOs in 2020, 10 were listed in the last quarter of the year, noted the India IPO Trends report by global consulting and auditing firm Ernst and Young.

So far, most of the IPOs have been oversubscribed. Many of them have even been able to keep the momentum going with 12 out of the 18 gaining since they listed on BSE. Only four like the Indian Railway Finance Corporation (IRFC), MRP Agro, Anumpam Rasayan India Limited and Craftsman Automation Limited ended lower than the issue price on listing day, according to data available on BSE.

A Reuters report states that India has already raised $2.2 billion through IPOs in 2021 only.

Experts attribute this flood of IPOs to growing indices. “Investors are getting better returns as the indices grow which is why there is so much interest in the equity markets,” says Pavan Vijay, a capital markets expert and founder of Corporate Professionals.

The BSE Sensex has grown from over 29,000 in March 2020 to 49,000 now.

As the IPO pipeline remains full for the year, experts say that healthcare, technology and logistics-based issues are likely to do well with the pandemic, while for others it might not be as easy a ride.

“The reason Easy Trip Planners got oversubscribed was because it continued to be the only profitable player even during the lockdown,” says Vishal Balabhadruni, senior research analyst at CapitalVia Global Research Limited. “It was a narrow escape for Easy Trip Planners with the second wave round the corner and travel restrictions being imposed.”

Balabhadruni states that the hospitality business is good in the long run not for short-term investments which is why putting money in an IPO such as Easy Trip Planners should be with a longer horizon in mind. “Such companies should list and investors should put their money only if they have long-term plans and not just for the sake of listing or investing,” says Balabhadruni.