Ample liquidity, stable market fuel IPO rush

(This story originally appeared in on May 17, 2021)

Mumbai: With the stock market showing resilience despite surging Covid cases and weakening economic fundamentals, around 10 companies have filed IPO prospectus with Sebi in the first half of May to collectively raise nearly Rs 20,000 crore. From early backers of some of these companies eyeing to exit to maturing businesses looking for funds for their next phase of growth and availability of liquidity globally, the reasons are quite a few for this rush, top merchant bankers said.

The companies include Nuvoco Vista —

group’s cement business, low-cost carrier GoAir, Divyani International — the franchisee for Pizza Hut and KFC, and CarTrade — the online auto classifieds firm. In the last week of April, Zomato had also filed with Sebi to go public and raise about Rs 8,200 crore.

According to HDFC Bank group head (investment banking) Rakesh Singh, after a long time, markets are closer to fair valuations and are at levels at which entrepreneurs feel they can offload part of their stakes through public offers.

“Investors are also getting a good window for reallocation of capital. In several businesses, we also see a cycle playing out, where private equity players and early investors are exiting or part-exiting, while a new set of investors are coming in through these fund-raising processes.”

For instance, in Zomato, of the expected Rs 8,200 crore that could be raised through its IPO, its stakeholder InfoEdge is eyeing Rs 750 crore. In Nuvoco Vista, of the Rs 5,000-crore, the promoters are eyeing Rs 3,500 crore, while in Devyani International, private equity investors and its promoters, both are eyeing some funds by paring their stakes.

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According to Kotak Mahindra Capital MD & CEO S Ramesh, ample liquidity in the Indian market and also abroad is helping these fund raisings. “This (liquidity surge) has resulted into a favourable capital market environment for companies to go public.” The companies which are filing for IPO are of reasonable size and good quality, Ramesh said.

Some companies have matured their businesses and now need growth capital for their next phase of journey. Also, the bunching up of IPO prospectus during the last few weeks could be because the companies eyeing public offering, have a six-month window to file with the regulator after they have published their audited results for the October-December quarter.



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