With valuations in the secondary market turning red hot, investors are flocking to the primary market wooed by right pricing of issues and hefty listing gains.

In fact, the enthusiasm to invest in IPOs, which started with the recent SME issues, has now caught up with the main board IPOs in recent times particularly after the concern being raised on the valuation of the broader market.

Several recent IPOs on the main board have been oversubscribed multiple times, as investors aim for both immediate listing gains and long-term appreciation by participating enthusiastically.

Recent IPOs that have seen strong subscriptions include that of Cyient DLM’s ₹592-crore IPO which was subscribed 67 times; Utkarsh Small Finance Bank’s ₹500-crore IPO that got subscribed 102 times; Netweb India Technologies ₹631-crore IPO which got a 90x subscription; and SBFC Finance Ltd’s ₹1,025-crore IPO that got subscribed 70 times.

Per BSE data, of the 58 IPOs this year, including 18 on mainboard and 40 on SME segment, 50 are trading above their issue price.

That valuations in the secondary markets have become dearer is underscored by the fact that the price-to-earnings (PE) ratio of the 30-stock BSE Sensex is currently at 23.99. This means that, on an average, an investor has to shell out 23.99 times the earnings per share to buy a Sensex stock.

Mahavir Lunawat, Founder & Managing Director, Pantomath Group, said there is a lot of demand for good stocks. Investor savings are getting channelled into primary markets as secondary market valuations have become very high. The price multiple expansion which has happened is due to overall positive sentiment on India, its market potential and economic growth, he said.

Since stocks of industry leaders are already commanding high multiple, investors are looking at newer stocks so that they get that value arbitrage, he added.

What’s next?

According to investment bankers, three IPOs — Ebixcash, Ratnaveer Precision Engineering, and Rishabh Instruments, aggregating ₹6,660 crore are likely to hit the capital markets in the next few weeks. In a first of its kind, insurance TPA (third-party administrator) Medi Assist Healthcare Services has filed paper with SEBI to raise funds through IPO.

Primary market investors are waiting with bated breath for Tata Technologies IPO. It will be the first from the Tata Group stable after a 19-year hiatus. The regulator had approved the company’s IPO in June.

Despite the deteriorating global economy and uncertainty over forthcoming general election in India, the equity markets had hit an all-time. However, it has fallen marginally in last few weeks as foreign portfolio investors trimmed their investments.

FPIs have sold shares worth ₹15,817 crore in the cash market so far in this month. However, on a cumulative basis, including primary market investments, their investment was at ₹10,689 crore in August.

Hemant Kanawala, Senior EVP & Head-Equity, Kotak Mahindra Life Insurance Company, said equity market are expected to remain volatile due to weak global cues. While corporate earnings of Indian companies are showing strong growth, there is limited room for improvement in valuation and investors are likely to get returns in line with earnings growth till the end of the year, he said.