Business Desk, Etv Bharat: Primary stock market is buzzing with activity again after a long lull as companies line up to launch their share sale offers.
New listings and offers were put on hold for quite some time after the coronavirus pandemic shut down the economy, thereby triggering a selloff in equity markets in March and April. But with stock markets coming back on track, companies are now reviving their plans.
The successful IPO of specialty chemicals manufacturer Rossari Biotech that concluded in July has also boosted sentiment.
The stock got listed on 23 July at 57% premium from its issue price after getting subscribed by almost 80 times.
This was the first successful IPO after that of SBI Cards and Payment Services Ltd that was launched in March earlier this year.
On Monday, IT services firm Happiest Minds Technologies received markets regulator Securities and Exchange Board of India’s (SEBI’s) approval to float its IPO.
The company had filed the draft papers in June after the markets started showing signs of recovery.
Kalyan Jewellers India Ltd, one of the biggest gold retailers in the country, also filed draft prospectus for its IPO on Monday.
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Earlier this month, media reports said that the government would launch an offer for sale (OFS) to reduce its shareholding in Indian Railway Catering and Tourism Corp. Ltd (IRCTC).
An OFS is a simpler method of share sale through the exchange platform for listed companies by means of which promoters or large shareholders can dilute their stake in the firm.
In July, Barbeque Nation had also received the market regulator’s approval for the plan to raise Rs 1,000-1,200 crore through an IPO.
Reasons behind the IPO rush
“Primary reason behind the recent rush in announcing IPOs is the abundant liquidity in stock markets,” said Jaikishan Parmar, equity analyst at Angel Broking.
“Lot of new demat accounts have opened up in the past few months, especially after lockdown. This has improved the chances of higher investor participation in these IPOs.”
Data from India’s two leading depositories show that number of active demat accounts in the country have risen sharply in the last six months.
Central Depository Services (India) Ltd data shows that number of active demat accounts rose to 2.4 crore at the end of July 2020 compared with 2 crore at the end of January 2020.
Similarly, data from National Securities Depository Ltd (NSDL) shows demat accounts with the depository rose to 2.01 crore by July-end from 1.94 crore at the end of January this year.
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“Also, lately the rally in midcap stocks has outpaced that of the largecap stocks. The only big IPO lined up is that of LIC (Life Insurance Corporation of India), rest are coming from smaller firms which have taken a cue from this midcap rally and want to come out with their IPOs at the right time in order to cash in on the positive sentiment,” Parmar added.
According to a Bloomberg report, the government is set to hire Deloitte Touche Tohmatsu India Ltd and SBI Capital Markets Ltd to help insurance behemoth LIC prepare for probably India’s biggest IPO so far.
Though the timeline on the launch of the IPO is yet not clear, the offer is expected to hit the market within the current fiscal year in order to help the government meet its disinvestment target.
