IPOs led by Paytm, Nykaa, and Policybazaar are set to raise more than Rs 30,000 crore through the primary market in the next few days, which would take fundraising to around Rs 97,000 crore, and analysts predict it could easily cross Rs 1 lakh crore by the end of the year. Such hectic fund raising was last seen in 2017 when companies raised Rs 67,147 crore through 36 IPOs. The IPOs of Policybazaar, SJS Enterprises and Sigachi Industries are set to open this week while two IPOs – of Nykaa and Fino Payments Bank IPO which opened last week – will also conclude this week.
While Nykaa is looking to raise Rs 5,352 crore through its IPO, Fino Payments Bank is looking to garner Rs 1,200 crore through the initial share-sale. Together, these seven companies – Paytm, Policybazaar, Nykaa, Fino Payment Bank, Sapphire Foods India, Sigachi Industries and SJS Enterprises will raise nearly Rs 33,500 crore through initial share-sales.
Tell me more about the 3 that are open for launch this week:
PolicyBazaar’s parent company will become the third Indian tech startup to tap the public markets after Zomato and Nykaa. The Softbank-backed insurance aggregator is planning to raise Rs 6,500 crore. It has already raised Rs 2,569 crore from anchor investors on October 29, ahead of IPO, and will now shore up Rs 5,700 crore through its IPO that comprises a fresh issue of Rs 3,750 crore and an offer for sale of Rs 1,960 crore. Investors can start putting in bids for the public issue on November 1. The offer will close on November 3, 2021.
SJS is one of the leading players in the Indian decorative aesthetics industry and supplies products for several industries including two-wheeler, passenger vehicle, consumer appliance, and sanitary ware. The company has already raised Rs 240 crore from 18 anchor investors. The IPO price band is Rs 531-542 a share and the issue closes on Wednesday. The IPO is entirely an offer for sale (OFS) of shares worth up to Rs 688 crore by Evergraph Holdings and shares aggregating up to Rs 112 crore by KA Joseph.
Sigachi Industries, the maker of cellulose-based excipients, plans to raise Rs 125.43 crore at the upper price band by issuing 76.95 lakh shares. The money raised will be used for expansion.
What about the other two?
The initial share-sale of Sapphire Foods India, which operates KFC and Pizza Hut outlets, will open for public subscription on November 9 and conclude on November 11. The IPO is expected to fetch Rs 1,500-2,000 crore and comprises a pure offer for sale (OFS) for 17.57 million shares by existing shareholders and promoters.
The Rs 18,300 crore IPO of One97 Communications, the parent entity of digital payments firm Paytm, will open on November 8, 2021, and will be available for subscription till Wednesday, November 10, 2021. The price band has been fixed at Rs 2,080-2,150 per share of the face value of Rs 1 each. Last week, the company had received a go-ahead from markets regulator Sebi. The digital payments giant aims to raise Rs 18,300 crore through the offer. The company has increased its IPO size by Rs 1,700 crore from the earlier Rs 16,600 crore, with the increment coming entirely from the existing shareholders selling more stake.
But how have IPOs fared so far?
“During the calendar year so far there have been issuances of around Rs 72,000 crore with 87 companies raising equity. This is in contrast to just around Rs 18,500 crore raised for the 10 months last year. Debt issuances through private placements have been higher at Rs 4.74 lakh crore for the 9 months ending September 2021 but lower than that last year when it was Rs 6.16 lakh crore. There have hence been higher debt issuances through the private placement route. However, public issuances of debt so far for the first 9 months was Rs 13,446 crore,” according to data analysed by Care Ratings.
The performance decoded:
Almost 1/3 of the issuances were for less than Rs 10 crore, followed by the large issuances of above Rs 1,000 crore and there were 20 companies which accounted for 23% of the total. The third largest category was the Rs 10-100 crore range which had 15 issuances or 17%. In fact, 9 of the 10 issuances in this group were less than Rs 50 crore each.
In terms of share in total the industries dominating were finance (16.4%), auto (14.7%), chemicals (13.5 %) and ecommerce (13.1%).
As the Sensex has reached the peak during the latter part of the period the issuances in the early part of the year would be at an advantage
The table above shows that for those who were chancing their luck and riding the Sensex wave and investing in all the issues, around 44% are going at lower than the issue price. Around 23% have outperformed and going at above 100%. Overall, around half have given returns of above 10% so far. So it is not a uniform story across the board.
Similarly, when the price movements are examined across size issuances, the failure rate – defined as the proportion of issues that are quoting lower than the issue price, is high in both the highest and lowest segments. At the Rs 1,000 crore plus level, 25% are quoting at a discount while 61% in the lowest range fall in this category. The Rs 500-1,000 crore category has the lowest failure rate of just 1 in 13. It is 267% for the Rs 100-500 group and 40% for the Rs 10-100 category.
“The boom in the IPO market has gone concomitantly with that in the secondary market. There is more diversity in the industries that have raised equity and is well spread across all sectors unlike the debt market. Interestingly, the 87 companies which have raised equity fall in all ranges and there is no bias as such in terms of size. The performance of these equities in terms of current price relative to issue price has been mixed. While 40% are quoting at a discount, this is witnessed in most of the issue size ranges and hence there can be no conclusion drawn on whether size matters. However, smaller issue sizes have tended to have a higher failure rate compared with the other ranges,” noted Care Rating.