With corporate companies making a beeline to launch their initial public offerings (IPO) amid the current stock market bull run, Gujarat Inc, too, is leaving no stone unturned to tap the buoyant primary market. Cashing in on retail investor euphoria, Gujarat-based companies have mobilized around Rs 8,736 crore via seven main-board IPOs so far in 2021. Switching to 2020, only one offering was launched from the state, by which Chemcon Speciality Chemicals raised Rs 318 crore.
Gujarat-based companies that raised money from the primary market this year include Tatva Chintan Pharma Chem Ltd, Heranba Industries Ltd, Anupan Rasayan India Ltd, Rolex Rings Ltd, GR Infraprojects Ltd, Exxaro Tiles Ltd and Nuvoco Vistas Corporation.
Not just from Gujarat, but companies across India have mopped up a staggering Rs 60,093 crores with 36 main-board IPO launches, by August 12. Against this, Rs 26,612 crores were collected from 15 IPOs in 2020, shows data compiled by Prime Database.
Liquidity, soaring equity markets fuelling rush
Soaring equity markets and strong investor sentiment have drawn fund-seekers to the primary market, said market players. “Globally, the current IPO momentum is the most active in the last 20 years. For example, in US, we witnessed unprecedented IPO activity led by tech unicorns, SPACs (special purpose acquisition companies) and sectors that proved resilient during the Covid-19 pandemic,” said Mahavir Lunawat, Founder, Pantomath Group, which recently lead-managed the IPO of Exxaro Tiles.
Agrees Parth Parekh, a research analyst at a city-based wealth management company. He said the excess liquidity due to central banks printing more money, buoyant stock market and lack of alternative investment opportunities are some of the factors powering the primary market.
Good returns are drawing investors
Good returns delivered by the previous IPOs have further bolstered the investor sentiment, riding which companies are also getting higher valuations. Of IPOs launched this year till August 12, only four have delivered negative returns. The average return of the remaining IPOs stood at a healthy 67%. “The likes of Barbeque Nation, Laxmi Organics, Easy Trip Planners, MTAR Tech and Nureca Ltd have delivered triple digit returns,” said a market expert.
Retail ownership at all-time high
The holding of retail investors — individuals with up to Rs 2 lakh shareholding — in NSE listed companies reached an all-time high of 7.18% as on June 30, 2021, rising from 6.96% as on March 31, 2021, according to primeinfobase.com, an initiative of PRIME Database Group. In value terms, retail holding touched a record high Rs 16.18 lakh crore from Rs 13.94 lakh crore in the said period.
According to Pranav Haldea, managing director, Prime Database Group, a buoyant secondary market and a flurry of new listings have helped in channelizing retail savings into the capital market.
Holdings of high net-worth individuals (HNIs) — with more than Rs 2 lakh shareholding in NSE listed firms rose to 2.10% from 1.98% in the first quarter this fiscal, taking the combined retail and HNI holding to an all-time high of 9.28%.
Market velocity will hold
With more and more companies filing papers for their issues, the rush for IPOs is set to continue for the rest of the year. Industry players expect another 30 IPOs to hit the market in the remaining months of 2021. The list includes popular names such as Adani Wilmar, Paytm, Policy Bazaar, Nykaa, Delhivery, Mobikwik and Aditya Birla Sun Life. “We expect the IPO party to continue, though, uncertainty looms over the possible third wave and consequential implications cannot be ruled out,” remarked Mahavir Lunawat, MD, Pantomath Group. Analysts say most of the IPOs listed this year are trading at high valuations based on price to earnings and price to sales ratio. Investors can take advantage of the buoyant markets.
Smaller firms tap SME-based platforms
While the small and medium enterprises (SMEs) IPO space witnessed less traction as compared to the main-board IPOs, Gujarat-based smaller firms also raised money by launching their offerings on SME platforms. As on August 10, about six companies from the state cumulatively raised Rs 35 crore via SME IPOs. Meanwhile, Aashka Hospitals Ltd’s Rs 101 crore SME IPO closed for subscription on August 13.
In 2020, only five SME IPOs, aggregating Rs 35 crore, were launched from Gujarat. Nationally, 27 SME public offerings were in 2020, and 26 already in 2021.
Gujarat companies mobilized about Rs 8,736 crore WITH seven IPOs in 2021 ALREADY; HAD LAUNCHED only one IN 2020
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