Public listings in the latter half of the year gave an average gain of 35 per cent on the first day, besting previous records set in an era in which smart-phones didn’t virtually exist, Facebook was still trying to edge out the now dead Orkut, and Whatsapp wasn’t yet born.
So, the previous best year for listing day gains was 2007, when the average listing gains yielded 29 per cent. Similarly, average returns of IPOs in 2020 were 61 per cent, the best since 2007 when the average was 90 per cent.
About 15 companies have raised Rs 26,612 crore so far this year, compared with Rs 12,363 crore raised by 16 companies in 2019 and Rs 30,959 crore raised by 24 companies in 2018, according to Prime Database.
Five out of 15 IPOs of 2020 – Mrs Bector Foods Specialities, Mazagon Dock Shipbuilders, Burger King India, Happiest Mind Technologies and Chemcon Speciality Chemicals – were subscribed more than 150 times.
Most of IPOs have been in sectors that have been resilient to Covid-19, such as commercial real estate, technology, specialty chemical or are market leaders such as CAMS, UTI AMC, said bankers.
“Investors have preferred to invest in companies that are seen as sector leaders or bellwethers as the theme being the crisis will help well capitalised companies consolidating their industry position,” said V Jayasankar, head of equity capital markets, Kotak Investment Banking. “Global, sovereign and pension funds in particular are prepared to invest significant amounts into India provided good quality paper are issued by sector leaders and bellwethers.”
Two IPOs in 2020 – Burger King and Happiest Minds – more than doubled on the listing day while Route Mobile, Rossari Biotech and Chemcon Speciality gave a return between 70 per cent and 90 per cent on the first day itself.
The huge success of the recent IPOs is also due to domestic brokerages and NBFCs aggressively extending IPO funding to high net worth individuals (HNIs) at an attractive interest rate, according to brokers.
In the recently concluded Mrs Bector Food Specialities IPO, the HNI category was subscribed 621 times, equivalent to bids worth Rs 50,650 crore. About 10 firms, including Kotak, Sharekhan, JM Financial, Bajaj, Motilal Oswal among others borrowed over Rs 40,000 crore at an interest rate between 3.5 per cent and 4.5 per cent, according to market participants.
“While HNIs make money from the listing premium, the lenders will make a neat profit with a 3-4 per cent spread,” said an investment banker.
