Primary Capital Market

Published: Dec 29, 2021
Updated: Dec 29, 2021

IPOs cock a snook at Covid

Despite almost the entire calendar 2020 being overshadowed by the Covid pandemic, an all-time high fundraising through the public equity markets was witnessed at Rs 1,77,468 crore. This was 116 per cent higher than Rs 82,241 crore that was raised in calendar 2019, according to Pranav Haldea, Managing Director, PRIME Database Group, India’s premier database on the capital market, which runs primedatabase.com. The previous highest amount raised in a calendar year was Rs 1,60,032 crore in 2017.

Strong retail participation in IPOs, huge listing gains and the highest-ever amount raised through QIPs and InvITs/ ReITs were the key highlights of the year.

IPOs: According to Mr Haldea, contrary to the despondency due to the pandemic, 15 mainboard IPOs came to the market, collectively raising Rs 26,611# crore. This suggests a spurt of 115 per cent from the Rs 12,362 crore raised through 16 IPOs in 2019. The number of companies and amounts raised through mainboard IPOs in the last 5 years are given in the table below:

The largest IPO in 2020 was from SBI Cards for Rs 10,341 crore. The average deal size was Rs 1,774 crore. Five out of the 15 IPOs that hit the market had a prior PE/VC investment. Offers for sale by such PE/VC investors at Rs 8,026 crore accounted for 30 per cent of the total IPO amount. Offers for sale by promoters at Rs 7,880 crore accounted for a further 30 per cent of the IPO amount.

Out of the 15 IPOs, 13 companies had anchor investors, which collectively subscribed to 29 per cent of the total public issue amount. Domestic institutional investors played a significant role as anchor investors, with their subscription amounting to 13 per cent of the amount. This was, however, lower than the 16 per cent from FPIs.

MEGA RESPONSE

The overall response from the public to the mainboard IPOs of the year, according to primedatabase.com, was very good. 9 IPOs received a mega response of more than 10 times (Mazagon Dock at 156 times followed by Mrs Bectors Food Specialities (138 times), Chemcon Speciality Chemicals (102 times), Burger King (86 times), Happiest Minds Technologies (82 times), Rossari Biotech (55 times), Route Mobile (52 times), Computer Age Management Services (33 times) and SBI Cards (19 times). One other IPO was oversubscribed by more than 3 times. Only 4 IPOs were oversubscribed between 1 to 3 times (response data of 1 recent IPO is not yet available).

As far as retail investors are concerned, the year witnessed tremendous response from them. The highest number of applications was received by SBI Cards at 26.95 lakh followed by Mazagon Dock (23.56 lakh), Mrs Bectors Food Specialities (22.02 lakh), Burger King (19.75 lakh), Chemcon Speciality Chemicals (19.71 lakh), Happiest Minds Technologies (18.62 lakh), Computer Age Management Services (18.57 lakh) and Route Mobile (13.62 lakh).

According to Mr Haldea, response to IPOs was further buoyed by the strong listing performance of IPOs of the year. Of the 14 IPOs which got listed, 10 gave a return of over 10 per cent (based on closing price on listing date). Burger King gave a stupendous return of 131 per cent followed by Happiest Minds Technologies (123 per cent), Mrs Bectors Food Specialities (107 per cent), Route Mobile (86 per cent), Rossari Biotech (75 per cent), Chemcon Speciality Chemicals (72 per cent), Gland Pharma (21 per cent), Mazagon Dock (19 per cent), Computer Age Management Services (14 per cent) and Likhitha Infrastructure (14 per cent). Moreover, all 14 IPOs (listed thus far) are trading between 1 and 220 per cent above the issue price (closing price of December 24, 2020).

Divestments: 2020 has been a dismal year for divestments with only Rs 42,815 crore being raised by the government. ETFs at Rs16,500 crore (39 per cent) was the most used mode followed by CPSE to CPSE sale at Rs 13,883 crore (32 per cent), Public Offers (IPO of Mazagon Dock and OFS of Bharat Dynamics, HAL, IRCTC and RITES) at Rs10,988 crore (26 per cent), buybacks (Mazagon Dock, Security Printing & Minting Corp., RITES, KIOCL, HPCL, NTPC and NMDC) at Rs 844 crore### (2 per cent) and remittances from SUUTI at Rs 600 crore (1 per cent). For 2020-21, the government has set a target of Rs 2,10,000 crore. Of this, only Rs 10,861 crore or 5 per cent has been achieved thus far. Reduction in the government’s holding in 23 listed CPSEs to 75 per cent (which is also a mandatory SEBI requirement) can contribute to over Rs 18,000 crore of this. Further, the government has also placed a roadmap for several unlisted profit- making CPSEs to get listed. Lastly, the government has also identified 45 CPSEs for strategic sale.

Outlook for 2021
According to Mr Haldea, the continuing buoyancy in secondary markets as also the listing performance of IPOs in the last few months have provided impetus to the primary market. The IPO pipeline continues to remain strong, with 28 companies holding SEBI approval wanting to raise nearly Rs. 28,706 crore, and another 7 companies wanting to raise nearly Rs. 4,410 crore awaiting SEBI approval.

Public Bonds: The public bonds market saw a near 60 per cent decrease with 20 issues raising Rs 7,485 crore, in comparison to 35 issues raising Rs 18,637 crore last year. The largest issues were from Tata Capital Housing Finance and Muthoot Finance, raising Rs. 2,000 crore each.

Debt Private Placements: The amount raised through debt private placement reached an all-time high of Rs 7,51,395 crore (as on December 24, 2020), up from Rs 7,09,979 in 2019.

Rights Issues: Mobilisation of resources through rights issues, according to primedatabase.com, recorded an increase in 2020. By amount, the period saw Rs 64,984 crore being raised, which was higher by 25 per cent than Rs 52,053 crore that was raised in 2019 and the highest ever amount raised through rights. This was primarily on account of one large issue of Reliance Industries (Rs 53,124 crore). By number, the year witnessed 20 companies using the rights route in comparison to 12 companies in the previous year. The number of rights issues and amounts raised in the last 5 years are given in the table below: