A good monsoon season and other positive economic indicators have led to a flurry of IPOs in the world's fastest-growing major economy.
Surging Indian economy leads to a flurry of IPOs
MUMBAI // India is witnessing a flurry of initial public offerings.
L&T Technology Services, the research and development arm of the Mumbai-based engineering firm Larsen & Toubro (L&T), yesterday became the latest to join the IPO bandwagon when it announced plans to raise 8.9 billion rupees (Dh488.8 million) through its listing on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Analysts say that there is keen investor interest, as India is set to be the fastest growing major economy this year.
“Good monsoons, eased inflationary pressures and stable FDI [foreign direct investment] inflows have lifted investors’ sentiments,” said Vikas Kumar, a partner at Lakshmikumaran & Sridharan, an Indian law firm. “The current upsurge in the number of companies accessing Indian capital markets through IPOs reflects this trend. This trend also reflects broad-based appeal as companies across a wide industry spectrum – infrastructure, e-commerce, banks, fintech, med-heath, have managed successful listings. Over the past few months, foreign institutional investors have gone long on equities and pared their debt investments, indicating a stable uptrend.”
ICICI Prudential Life Insurance yesterday outlined the details of its IPO, which is set to launch on Monday next week. It will be the first life insurance company to list in India. This is set to be the biggest IPO in India in six years, with plans to raise more than US$900 million.
BSE, the oldest stock exchange in Asia, on Friday filed for its IPO, which would be on its rival, the NSE.
“One of the most interesting things about the recent IPOs is that some of them are from the new economy sectors,” said Abhimanyu Sofat, the vice president of research at India Infoline, a financial services company in Mumbai. “Investors don’t have historical relative precedence for these sectors in terms of what should be the valuation of these stocks.”
He said that a lot of “new money” in the form of foreign investment was coming to India because it is one of the few-fast growing major markets globally.
These new sector IPOs were proving “quite successful because their business models are different and the growth opportunity is different”.
“This is a welcome change that is happening in the primary market now in India,” said Mr Sofat.
But not all listings have done as well as might have been hoped. L&T launched an IPO of another of its subsidiaries, L&T Infotech, its IT arm, in July. This was 12 times oversubscribed, but its shares are trading down almost 10 per cent at 640 rupees a share compared to its listing price of 710 rupees.
Sumit Peer, the founder and chief executive of Aurelius, a consultancy firm based in Noida in north India, said that there was a need for IPOs in India “to fuel this growth engine”.
He said that the environment was favourable and he expected the latest listings to do well.
Apoorv Ranjan Sharma, the co-founder and president of Venture Catalysts, said that he hoped to see a wave of “new-age tech companies hit the bourses in next two to three years”.
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