Gone are the days when companies would time their IPOs to the sentiments in the secondary market. Over the last few years, companies are going for fund-raising through public floats irrespective of the performance of the secondary market at that point in time. For example, in FY16, capital raising witnessed growth of 15.5 per cent in FY16 even as benchmark indices and the broader market gave negative return of 8-10 per cent.

Most market experts feel that the money raised through IPOs is getting increasingly delinked from secondary market performance. “Most of the money is being raised from consumption-driven sectors, such as financial services and consumer. These companies perform well or better than other sectors despite a weak macroeconomic scenario,” said Jayashankar, head of equity capital markets, Kotak Investment Banking.

FY17 is expected to be a record year for IPOs with a nine-year high level of ₹25,000 crore mopped up by a number of companies including the BSE, Music Broadcast and Avenue Supermarts. In fact, had it not been for demonetisation, the markets would have witnessed record mop-up figures by now. FY08 holds the record for the highest amount of money raised by India Inc at ₹49,565 crore through IPOs.

17 cos plan ₹21,950 cr According to data provided by Prime Database, 11 companies that have received approvals from markets regulator SEBI, are looking to raise about ₹5,700 crore. Another 12 companies that are looking to raise ₹16,250 crore are awaiting SEBI approval. That’s a total of ₹21,950 crore planned to be mopped up through IPOs in FY18. Going ahead, there would be many more companies getting added to the list, especially as economic activity picks up.

There are several other reasons for the sustainable pipeline of capital-raising via IPOs, which also holds true for secondary market investing. First, the government’s thrust on making India a digital economy will continue to lure people to invest in financial assets. For example, demonetisation led to a flush of funds into the banking system, part of which was also channelled into mutual funds and that in turn led to the total net inflow in MF schemes at ₹3.03 lakh crore in April-November 2016, compared to ₹1.84 crore in the same period last year.

Second, domestic institutional investors continue to pump money into the equity markets led by mutual funds thanks to strong inflows from the systematic investment route. Hence, they will continue to participate in IPOs and remain key players. Third, currently there is a lack of investment avenues and equity as an asset class, whether primary activity or secondary markets, will continue to be in favour among investors.

“The shift of investments to financial assets will continue as people don’t have any other option. Besides we are in a structural bull market and the worst is still 1-1.5 years away. So, the pipeline of IPOs will continue,” said Jimeet Modi, CEO, SAMCO Securities.

Fourth, stretched or fair valuation of the broader market would also lead to demand for IPOs amid investors chasing value. Lastly, the government’s disinvestment programme, including listing of general insurance companies, would keep the IPO pipeline buzzing.

Also, investors have made good money in IPOs over the last two years and thus there is demand or willingness to put money into new themes or companies, an analyst pointed out.

No big data to support However, Pranav Haldea, Managing Director, Prime Database differs slightly as he believes that primary market activity is very much related to secondary market performance. “In the ongoing fiscal, close to 90 per cent of the monies were raised till November as markets rallied 12 per cent during April-Oct. Post-demonetisation, there was a lull between November to February and only three issuances were there. So, it still tracks secondary market performance and confidence needs to be there,” he said. .