IPO mart looking up: Rossari set to test waters; few others may follow

Rossari would be the first IPO after SBI Cards & Payments IPO hit the market in early March.

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A total of 31 companies that have received an approval from Sebi are in the queue to tap the equity markets.
Mumbai: After a long dry run, India’s IPO market is finally warming up and a few offerings are lined up to hit the market in the coming days.

The start, though, will be gradual, say bankers.

Specialty chemicals manufacturer Rossari Biotech’s initial public offering (IPO) is likely to hit the market next week, while private lender YES Bank may come up with a follow-on public offer (FPO) later this month, two people aware of the development said.


Rossari Biotech declined to comment, while an e-mail sent to YES Bank remained unanswered.

This would be the first IPO after SBI Cards & Payments IPO hit the market in early March. Subsequent to that, Rossari Biotech postponed its IPO plans due to the extreme volatility in the market due to the Covid-19 pandemic. Subsequently, issues had dried up in IPO mart.

SBI Cards IPO, which raised more than Rs 10,000 crore, was the largest in financial year 2019-20. The company's shares are currently trading 7.4 per cent below issue price.
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While the primary market activity has otherwise been lacklustre, there have been exceptions. Oil-to-telecom conglomerate Reliance Industries successfully completed a mega rights issue of Rs 53,124 crore in May, which was the country’s largest ever.

“Primary market activity is indeed picking up. There is increasing interest from equity investors, and we are seeing good traction across Asia. Besides rights issuances, IPOs and FPOs are now being lined up as well,” said Utpal Oza, Managing Director & Head of Investment Banking at Nomura India.

“Sentiment has improved in sync with the robust activity in the secondary market,” he said.

One major change for bankers has been that instead of hosting road shows across geographies, they are now conducted virtual meetings, due to travel restrictions due to the Covid-19 pandemic.
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“Roadshows have gone digital, and it has been a smoother investor interaction process which is quite productive. With the Covid restrictions, travel across the globe is now replaced with focused investor interactions Q&A sessions and video calls with investors. Issuers in fact are now reaching out to many more investors.” said Oza.

Some 31 companies that are sitting with IPO approvals from the Securities and Exchange Board of India to raise a total of around Rs 31,056 crore, data from primary market tracker Prime Database showed.
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These include asset manager UTI Asset Management, Indian Railway Finance Corporation and Bajaj Energy, among others.

UTI Asset Management Company (AMC) received Sebi's go ahead last month to raise a little over Rs 3,000 crore through its IPO.

Five other companies have filed for approvals with the markets regulator. But analysts say the pickup in IPO activity is going to be gradual, as companies and bankers struggle to model around uncertainties surrounding the Covid-19 outbreak and the subsequent slump in economic activities across the globe.

While the secondary markets have recovered from March lows, they are still far away from the record highs hit in January. Benchmark Sensex has recovered more than 42 per cent from March lows in sync with global markets, but is still down 11.6 per cent on a year-to-date basis, and nearly 16 per cent away from its record highs hit in January.

Besides, the market outlook continues to be uncertain, due to a surge in Covid-19 spread across the globe and in India. This uncertainty will also weigh on any resumption of activity in the primary market.

“It (primary market activity) will pick up, but slowly. Companies that had lined up issues before Covid are planning to hit the market now,” said V Jayasankar, Head of Equity Capital Markets at Kotak Investment Banking.

“Roadshows are happening through virtual meetings. Of course in an IPO, people like to meet in flesh and blood, but they are getting used to it gradually,” he said.

Jayasankar said the Covid-hit world has brought in uncertainty around the businesses. “It takes longer and is more challenging to model in anything the post Covid-19 world. But investors are getting used to it,” he said.

Pranav Haldea, Managing Director at Prime Database, does expect a lot of IPOs to hit the market as the Covid-19 uncertainties continue. “It is good to see some action. The IPO market was all silent for a while since the SBI Cards issue. The market has been extremely volatile, but we did see a bounceback in the last couple of months. I don’t expect a lot of IPOs to hit the market now, maybe a select few,” he said.
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