An analysis of initial public offering (IPO) activity in the fourth quarter of the 2017 fiscal year signals a healthy year ahead in terms of equity markets, according to observers.
Despite uncertainty about how the landmark goods and services tax (GST) will pan out, India is still considered a promising destination for global investors, an EY report states.
The firm said there were 14 IPOs on the BSE and BSE SME indices in the January-March quarter, the biggest being Avenue Supermarts Ltd., operator of the D-Mart retail chain. Its Rs 1,870 crore IPO coincided with the BSE Sensex hitting a two-year high.
What new listings can I expect in the coming financial year?
Several state-run companies are expected to float shares on public markets, in line with the government’s divestment target of Rs 72,500 crore for the 2017-18 fiscal year. Numbers from PRIME Database show than 23 companies at different stages of SEBI approval are vying for at least Rs 25,000 crore worth of shares in the next financial year.
Cochin Shipyard Ltd. (CSL), Housing and Urban Development Corporation Ltd. (HUDCO), Central Depository Services Ltd. (CDSL) and National Stock Exchange of India Ltd. (NSE) are some of the companies looking to float shares soon.
CSL has proposed to issue 3,39,84,000 equity shares at Rs 10 each in its long-delayed IPO, for an equity capital totalling Rs 33.984 crore. The government is also looking to offload a 10% stake in HUDCO at roughly Rs 1,000 crore, a sale that would value the company at Rs 10,000 crore.
There’s speculation that the IPO of the NSE may raise more than Rs 10,000 crore by existing shareholders dumping 20%-25% of shares through the offer for sale option.
In the financial services space, UTI Mutual Fund, India’s oldest asset management company with 1.37 lakh crore assets under management, could raise Rs 6,800 crore in an IPO this year. If so, it would be the first domestic mutual fund to list its shares on the bourse.
SBI Life is another upcoming IPO that followers of market news are keenly watching. State Bank of India (SBI), which owns 74% of the insurer, wants to dilute an 8% stake, while its joint venture partner, BNP Paribas Cardif, would offer 2%.
A stake sale in SBI Life would make it the second Indian insurance company to be listed, after ICICI Prudential Life Insurance floated its shares in September.
Taking a cue from the US, where Warren Buffett has invested USD 9.3 billion in four airlines, GoAir’s promoters have also expressed an interest in an IPO this year.
Sounds exciting. How can I get a piece of the action?
Analysts expect the momentum of Indian equity markets to continue over the year, so you may want to prepare as bulls are already lining up.
You’ll need a demat account. Most banks have made it very easy to participate in IPOs online through a facility called Application Supported by Blocked Amount (ASBA). This enables prospective shareholders to block the money needed to subscribe to an issue. Only if the requested shares are allotted to you is the money withdrawn from your bank account. Of course, the traditional method of bidding for an IPO through a stockbroker still works.
You can then track the performance of these newly-listed companies – and therefore your returns – on the benchmark BSE IPO index. It lists the value of companies for two years after they go public.
For more business news, visit BloombergQuint.