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At a time when the BSE Sensex declined by almost 10 per cent, five IPOs hit the market and tapped the opportunity successfully.
“In difficult times such as these, only the brave or desperate or fundamentally-strong companies can tap the capital market,” says Mr Prithvi Haldea, Chairman & Managing Director, Prime Database, which tracks primary capital market.
If the above statement is taken as true then the five companies which came out with their initial public offerings (IPOs) between July 26 and August 31 are not only “brave”, but are “fundamentally strong” as well, because these IPOs succeeded in attracting investors enough to receive high subscriptions.
Investors seem to have shown a great amount of confidence in these companies, as evidenced by the number of times these issues got subscribed. “Companies looking to enter the capital markets should also be willing to compromise on valuations,” added Mr Haldea.
Successful IPOs
The five IPOs that hit the equity markets during the period between July 26 and August 31 were L&T Finance Holdings, SRS Ltd, Brooks Laboratories, Tree House Education and Accessories and TD Power Systems. During the period, the Sensex fell 9.52 per cent — from 18,000 to 16,000 level.
L&T Finance Holdings was the first IPO to hit the trading circuits since the descent of the equity markets. The issue was open for subscription from July 27 to July 29 and it raised close to Rs 1,200 crore.
What worked in favour of L&T Holdings Finance was the backing of the promoter group L&T. With the backing of such a strong brand, the IPO was bound to see higher participation as compared to the other smaller companies which launched their IPOs, said market experts.
“While the other four IPOs were of lesser known companies, they all had interesting themes, like Tree House Education. However, most of them are now trading at a discount from their listing price,” said Mr Abhinav Angirish, Managing Director, Abchlor Investment Advisors.
SRS raised close to Rs. 225 crore, Brooks Laboratories around Rs 63 crore, Tree House about Rs 100 crore and TD Power Systems mopped up Rs 227 crore through their IPOs.
However, experts say that this is far from being a trend, as bear market conditions are not conducive for entering the capital market.
“Often the companies are compelled to enter the capital market, because, once SEBI gives its clearance they only have a year's time before the permission expires,” said Mr Jagannadham Thunuguntla, Strategist and Head of Research, SMC Global Securities.
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