IPO rush ahead of FPI holiday season

More than half a dozen companies will hit the market with their initial public offerings (IPOs) between now and the end of next week.

The cumulative amount raised from these IPOs is expected to be around Rs 8,000 crore.

Stationery products firm DOMS Industries and home financier India Shelter Finance's IPOs — of Rs 1,200 crore each — got off to a flying start on Wednesday (December 13), with the former garnering over six times the subscription and the latter getting 1.5 times subscribed.

Industrial gas manufacturer Inox CVA’s IPO — the largest in the current lot at Rs 1,459 crore — opened on Friday (December 15).

Half a dozen other companies, including Muthoot Microfin and Suraj Estate Developers, are lined up.

This IPO rush will break the jinx seen during the December preceding the General Election year.

There were no IPOs in December of 2008, 2013, and 2018, while 2003 saw two IPOs, according to data provided by Prime Database, an IPO tracker.

The first fortnight of December 2023 saw no IPOs amid political uncertainty due to elections in five states.

However, with the state poll results seeing the ruling Bharatiya Janata Party win three out of the five states, analysts say the political outlook has turned favourable.

The poll results have given investors hope for policy and regime continuity after the general elections next year.

December is generally a muted month for capital raising on account of the holiday season.

As a result, companies are rushing to complete their share sales before the end of next week, following which foreign portfolio investor (FPI) flows could moderate.

FPIs have bought shares worth Rs 31,471 crore so far in December.

“India is a very different place from the previous Decembers.

"The kind of rally we see this month is unprecedented.

"When you see the secondary market buoyancy, primary market participants are trying to tap into it.

"A lot of companies that come with IPOs are private equity (PE) portfolios.

"PE players have been investing heavily every year, and there is a lot of pipeline of PE paper that still needs to see exits.

"PEs push for exits whenever they see good momentum,” said Ajay Garg, founder of Equirus.

Over half of the combined issue size of the IPOs that hit the market this month comprise secondary sales.

Inox CVA’s IPO is a pure offer-for-sale issue, with promoters selling stakes.

Meanwhile, India Shelter Finance's IPO will see a bunch of PE players offloading their stakes.

Happy Forgings and Muthoot Microfin will be a mix of primary and secondary share sales, while Suraj Estates and Motison Jewellers are entirely fresh issues.

Meanwhile, the IPOs of Apeejay Surrendra Park Hotels and Medi Assist Healthcare received the go-ahead from the market regulator.

Investment bankers said that unless urgent, companies will not launch share sales between December 22 and January 7.

Garg said FPI holidays are another factor for the current rush.

“Companies want to get done as much as they can before December 22.

"Otherwise, they will come after the first week of January.

"The timelines of IPOs are a consequence of getting the paperwork done and regulatory compliance,” he added.

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