Primary markets see revival in second half of CY20

New Delhi, Sep 17 (IANS) The sharp turnaround in the secondary markets with the broader market also participating in the rally, has enlivened the primary markets once again with a slew of initial public offerings (IPOs) from a diverse range of companies set to hit the street in the second half of the 2020 calendar year.

Market analysts tracking the development said that a host of promoters are once again rushing to the primary market to make the most of the opportunity where recent IPOs have not only been oversubscribed by several times but it has also brought back retail investors into the market who hold the key to maintain the rally for IPOs.

So in the pipeline now are more IPOs like CAMS, UTI AMC, Angel Broking, Chemcon Speciality Chemicals, etc. that are likely to open in September.

Besides, Kalyan Jewellers, NCDEX, Barbeque Nation, Burger King, Bajaj Energy, Lodha Developers are some of the names likely to hit the market in CY20. Of this CAMS and UTI AMC will be big ticket size IPOs.

LIC could also join the bandwagon later this year and could be one of the largest IPO in the country ever — going by the company’s size.

The government is looking at offloading 25 per cent stake in LIC in tranches, as it is falling short of its divestment target of Rs 2.1 lakh crore this fiscal.

For this, it is likely to incentivise the participation of retail investors/employees/policy holders by providing some discount.

Post the SBI Cards IPO at the start of CY20, there was a lull in the primary market till the month of July.

Then the two companies – Rossari Biotech and Mindspace Business Parks REIT, finally decided to hit the market that month and successfully closed their IPOs.

They together raised Rs 5,000 crore from investors amid heavy demand. Rossari Biotech was oversubscribed 80 times and surged more than 60 per cent on market debut. Even Mindspace REIT saw 13x subscription and listed with 11 per cent premium.

The stellar debut by these two companies in July instilled faith in the investors. Soon in the month of September, they were followed by two more companies – Happiest Minds Technologies Ltd and Route Mobile Ltd, who also saw stellar demand for their IPOs.

Happiest Mind got subscribed 151 times while Route Mobile got subscribed 73 times.

“In the last five months, a lot of new retail investors have come into the market. Since there had not been any lucrative IPO opportunities since March, so retail investors participated heavily in these recent IPOs. They were attracted by strong grey market premium which has the potential to give substantial listing gains. In addition, with interest rates being very low, and the grey market premium running high, it provided lucrative opportunity for retail investors to participate in these IPOs,” Hemang Jani, Head – Equity Strategy, Broking & Distribution, Motilal Oswal Financial Services, said in a note.

The emergence of retail investors in the midst of the Covid-19 pandemic had put fresh strength in the primary market.

Otherwise, the calendar year 2020 so far has been a lacklustre year for the IPO market.

In CY19, 16 companies launched their IPOs raising over Rs 12,000 crore, and CY20 was expected to be a rebound year, but it again got derailed due to Covid-19.

A number of companies that had received regulatory approvals, also postponed their IPOs, waiting for a recovery in the equity markets.

Not with the sharp turnaround in secondary markets and the broader market also participating in the rally, the primary market is reviving once again.

A slew of IPOs are expected to hit the street in the second half of CY20. Promoters are rushing to the primary market to make the most of the opportunity. The increase in liquidity flows is also helping their cause, the brokerage said.

The renewed interest in IPOs will have to wait for the LIC issue to hit the markets later this year.

LIC issue is not only expected to become India’s biggest IPO ever, it could make stock exchanges quite broad-based and could change India’s weightage and rating across various global indices including MSCI.

LIC is likely to raise about Rs 80,000 crore from the IPO. Assuming 35 per cent retail portion, about Rs 25,000-28,000 crore would be raised under the retail category which is 2.5x retail participation witnessed during the Coal India IPO.

Thus, the LIC IPO could broaden the retail equity shareholders participation in the country, the brokerage report said.