Primary market investor interest gushes on strong IPO returns
MUMBAI: The Initial Public Offerings (IPOs) witness strong demand. The investors have confidence in the primary market, which has delivered fruitful returns this year. So, the primary market investor interest gushes on strong IPO returns.
Ujjivan Small Finance Bank Ltd
The initial share sale of Ujjivan Small Finance Bank Ltd, which closed on Thursday with 170 subscriptions. These subscriptions remained the highest number seen as of 2019.
CSB Bank and IRCTC
The IPO of Fairfax-backed CSB Bank Ltd with 87 subscriptions in November. While the Public Offering of state-owned Indian Railways Catering and Tourism Corp Ltd (IRCTC) remained subscribed 112 times earlier when it hit opened in October. Ujjivan Small Finance Bank shares are yet to be listed.
Thereby, the IPOs continued to deliver stellar listing gains for investors. The price of IRCTC shares has almost jumped to 128% on listing day. Accordingly, at 54%, CSB Bank’s shares closed above the company’s IPO price.
However, according to industry experts, IPOs have a high demand. Thus a derivative of the listing performances delivered earlier in 2019 for investors. As a result, investors seem to be coming back for more.
Furthermore, Jibi Jacob, Head of Equity Capital Markets at Edelweiss Financial Services Ltd., while addressing, said that, in 2019, only a few IPOs have happened. He continued that, eventually, the experience of IPO has earned itself some great investors. Besides, except for one issue, rest other issues have done explicitly well. He then added that, positively, investors started investing in IPOs.
Also, according to data from Prime Database, only 14 companies have hit the primary market altogether raising ₹11,111.65 crores till November.
Subsequently, through the initial shares, in the year 2018, 24 companies had raised ₹30,959 crores. While in 2017, 36 companies raised ₹67,147 crores, shows data.
IPO market demands
In the recent IPOs, the demand showed that there is sufficient liquidity chasing primary market deals.
Senior Executive Director and Head of Equity Capital Markets at Kotak Investment Banking, Mr. V. Jayasankar said that their system has enough money to invest. But the markets have been unstable. As a result, he said that fewer deals have gone through this year compared to the previous year.
According to Mr. Jayasankar, the recent success of IPOs is not just a factor of supply-demand theory. But also of the quality of companies that came into the market. He also said that the quality of issuance has the highest order across the past five years. So, the average IPO return has more than 50% this year.
Jayasankar added that investors remained to get good returns in the market, beating every index.
Therefore, bankers hope that the trend continues into the next quarter. Also, expect quality issuers to experience strong investor interest.
Mr. Salil Pitale, Joint Managing Director and Co-Chief Executive Officer at Axis Capital mentioned that they expect IPOs from good quality issuers which have a good price, to see strong demand. He added that quality issuances do not concern liquidity. Mr. Pitale also said that people discriminate in terms of where they want to invest their money. Unless it has a quality name, the institutional demand comes in and then retail and high net worth individual (HNI) investors follow.