At least half a dozen companies are looking to launch their initial public offerings (IPOs) in May post the mega IPO of Life Insurance Corporation (LIC) of India. These firms are looking to raise ₹7,960 crore through their IPOs this month, a report by Business Standard stated.
Total funds raised could reach ₹28,960 crore, making May the best month for IPO fund-raising after November 2021, noted the report. In November 2021, nine companies had raised ₹35,664 crore through IPOs.
One of the biggest IPOs after LIC to be launched in May would be the ₹5,235-crore IPO of Delhivery, an integrated logistics company. It will open on May 11. The issue comprises a ₹4,000-crore fresh issuance while the rest is an offer for sale, said the report.
Venus Pipes and Tubes, Ethos, Hexagon Nutrition, eMudhra, and Aether Industries are the other IPOs likely to be launched during the month, added BS.
"The IPOs are coming when equity markets are volatile largely due to the hawkish stance of central banks the world over, an inexorable war in Ukraine, and fears around economic growth. Rising inflation has forced major central banks, including the US Federal Reserve (Fed), to prioritise fighting price puffiness. The statements by Fed officials in April hinted at an aggressive reduction of its balance sheet and a 50-basis point (bps) hike," said the report
Fed Chair Jerome Powell said “one or more” 50-bps hikes could be appropriate to tame the hottest inflation in four decades. The war between Russia and Ukraine continues to weigh on sentiment.
Rising crude oil prices have increased India’s import bill.
BS further stated that the negative global cues have led to foreign portfolio investors (FPI) selling Indian equities worth ₹1.3 trillion in 2022. Foreign investor participation plays a crucial role in keeping the IPO market robust.
The gains in the secondary market helped 63 companies to raise ₹1.18 trillion through IPOs. Bankers told BS that there is enough liquidity in the market to absorb all IPOs, volatility and the launch of LIC’s mega issue notwithstanding.
“In the past six months, retail and domestic institutional investors have absorbed the impact of FPI selling. We are coming of age. There will be a temporary crunch because LIC will suck out some liquidity. Soon enough, there will be windows for new IPOs to come up,” Rajendra Naik, managing director, Centrum Capital told the market daily.
However, bankers said issuers will have to make reasonable compromises regarding valuations if heightened volatility persists.
“Valuation adjustments are now a reality. Promoters will have to temper their expectations based on market scenario,” added Naik.
Lofty valuations, especially for loss-making unicorns, had been pilloried after Paytm’s listing debacle last year.
“Calendar year 2022 is unlikely to see the same level of primary market issuances as in 2021. While there is a robust pipeline of companies that have received or are awaiting Securities and Exchange Board of India’s approval, the secondary market is still volatile. We have seen a few good issues of late. Prospective issuers will take confidence from that,” Pranav Haldea, managing director, PRIME Database told Business Standard.