The IPO Rush Continues in December. Will the Trend Last in the Coming Months?

Despite the obstacles related to pandemic, there has been a huge rush of initial public offerings (IPOs) in the primary market this year.

In the first 11 months of 2021, a total of 53 IPOs (including 1 REIT and 1 INVIT) hit the market.

Moreover, the month of November has smashed the record for highest-ever mobilisation through IPOs, and December is considered to be equally busy.

A total of nine companies have raised a record Rs 367.2 bn via IPOs in the last month, which is highest single month fundraise seen in a decade. The largest IPO to hit the market during the month was Paytm.

During the previous IPO boom in November 2017, companies had raised Rs 188.2 bn, while Rs 182.4 bn was raised in August 2021.

Paytm's Rs 183 bn public issue is the largest in history - accounted for almost 50% of the funds raised during the month.

A bit about the December IPO rush

The primary market activity is expected to be strong in December as well. Funds raised through IPOs in the first half of December stands at Rs 129 bn.

Last week, three IPOs - Rakesh Jhunjhunwala-backed Star Health and Allied Insurance, Tega Industries, and Anand Rathi Wealth - concluded their public offers for subscription.

Moving on to this week, a total of four companies will open their public issue for subscription. The four IPOs are RateGain Travel Technologies, Shriram Properties, C.E. Info Systems, and Metro Brands.

Moreover, MedPlus Health Services, a pharmacy retail chain will open for public subscription next week on Monday, 13 December 2021. This issue will fetch the company Rs 14 bn from the market.

In addition, the companies that have solidified their IPO plans are Global Health, which operates and manages hospitals under the Medanta brand and Healthium Medtech, which is set to open for subscription on 15 December.

Apart from these, Metro Brands, AGS Transact Technologies, Shri Bajrang Power, Ispat, and VLCC Health Care also added that they may highlight public issues during the review period.

Also, wedding apparel maker Vedant Fashions could also kick off its share sale in December, according to a report.

If they're all successful, it could become the busiest December for IPOs on record, surpassing the record of US$972 m raised in the same month of 2012.

Indian firms have already surpassed the record for IPO volumes this year, with US$15.5 bn (around Rs 1.2 tn) raised so far.

Popular companies that made their way in the secondary market in 2021

There were several bigwigs from varied sectors who launched their IPOs in 2021. Some of the most noteworthy names in this regard are the following:

Zomato: One of the most notable names on the list, Zomato made quite an impression among investors with its IPO. The company floated an IPO worth Rs 93.8 bn.

Indigo Paints: The fifth-largest decorative paints manufacturer in India, Indigo Paints launched its IPO back in February 2021. The company's shares made a stellar debut on the bourses with a 75% gain over the IPO price.

Devyani International: The Rs 18.4 bn IPO by the largest franchisee of Pizza Hut, KFC, and Costa Coffee in India, Devyani International made a strong market debut as it got listed at 57% premium over its issue price.

FSN E-Commerce Ventures (Nykaa): Beauty and fashion ecommerce platform Nykaa, wowed the Indian investors with its stellar debut in the stock market last month. The company listed at a premium of over 77% compared to its issue price.

Apart from these, companies such as PB Fintech, Sapphire Foods India, Aditya Birla Sun Life AMC, Shyam Metallics, Kalyan Jewellers, and more made their stock market debut in the past 11 months.

To check the performance of these newly listed businesses, you can use Equitymaster's stock screener for better understanding.

Are Start-up IPOs Affecting the Value Game?

Unicorns like Zomato, Nykaa, Paytm and Policybazaar have raised funds in the range of Rs 53 bn to Rs 183 bn, with valuations of Rs 460 bn to Rs 1.5 tn.

Indian tech start-ups, which have reaped an unexpected bonanza as a result of the pandemic, have benefited disproportionately from the significant shift in consumer spending and investment behaviour.

The blockbuster IPOs of these new-age tech companies show the valuation game has changed, as focus the shifts from earnings to growth potential.

According to a report, digital companies account for only around 1% of India's market cap, compared with about 25% in the US and 15% in China. As more such companies get listed, the marketcap may rise to around 15% by 2027.

The demand for these start-ups from investors was massive. Nykaa's Rs 53.5 bn IPO received bids worth Rs 2.5 tn.

While Zomato's Rs 93.8 bn IPO saw demand worth Rs 2.1 tn. Similarly, Policybazaar, Easy Trip and CarTrade received bids between Rs 400 bn and Rs 560 bn.

Investors are paying up for future growth.

Will the IPO frenzy continue in the coming months?

While India's IPO market has performed exceedingly well in the past few months, there's much more in store for investors.

Half a dozen companies such as Oyo Rooms, Delhivery, Pharmeasy, Snapdeal, Mobikwik, and Ixigo plan to raise around Rs 260 bn in the next three months.

Many of these companies will evince investor interest, as these are brands commonly used by people across the country. Also, familiarity with their products or services will bring in more new and young investors in the market.

Moreover, given the abundant liquidity and the market regulator easing listing procedures, the IPO craze is understandable.

Data suggests that companies raised funds to the tune of US$4.6 bn from IPOs last year. The market believes this amount will be easily surpassed in 2021.

As companies line up to raise funds from the market amid high valuations, investors need to consider many factors before investing their money in an IPO.

If you are investing in an IPO, weigh in all the positive and negative factors affecting the company.

Take a close look at the company's financials and valuations. It would give you a clear picture of what's brewing.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more here...