Stocks

IPO fever: After IRCTC’s success, will the capital market see more big-ticket public issues?

KS Badri Narayanan | Updated on November 05, 2019 Published on November 05, 2019

IPOs worth ₹30,000 crore in the pipeline, including those of SBI Cards, CSB Bank, IREDA, Bajaj Energy, UTI Asset Management, HDB Financial, Equitas Small Finance Bank and Ujjivan SFB

A host of public issues from high-profile companies to the tune of ₹30,000 crore, especially from the financial services segment, may hit the market in the next few months. While some of them have already received regulator SEBI’s nod and are waiting for the right time, others have initiated the process to tap the primary market. Among them are SBI Cards and Payment Services, CSB Bank, IREDA, Bajaj Energy, Ujjivan SFB, Angel Broking, Annai Infra Developers and Shyam Steel Industries.

These companies have to hit the market within one year of SEBI's approval, otherwise they have to reapply for an IPO.

No dearth of money with investors?

With ₹30,000-crore on offer, does the Indian market have have enough liquidity? According to AK Narayan, Founder of AK Narayan Associates, a Chennai-based advisory company, there is no dearth of money with investors. Indian investors (be it retail or institutions) have enough money. “However, what puts off investors is the absence of integrity among promoters,” he said, adding: “The main crux for the success of an IPO is the pricing of the issue.”

If both conditions (promoter integrity and pricing) are met, investors would not hesitate to put in their money, he said.

According to Arun Kejriwal of KRIS Capital, SEBI has cleared 37 IPO papers but some have elapsed, as the companies failed to hit the market. Most were waiting for the secondary market sentiment to turn positive.

“Now with the secondary market buzzing with activity, some of them will try to enter the market. However, the key to attract investors is the valuation of the IPO. If a company offers a long-term growth story along with the right price, institutions will definitely subscribe to those issues“.

For, high-net-worth individuals who borrow money to subscribe to the issue, sentiment is more important. Their plan is make a quick buck in the first two days and exit the stock with a reasonable profit. On the other hand, for retail investors, who most of the time sell existing holdings to enter the primary market, valuation and promoter integrity are key issues, added Kejriwal.

Key IPOs

 

Here are the profile of companies that plan to the capital markets:

SBI Cards and Payment Services Pvt Ltd

It has invited initial bids to appoint book-running lead managers for its proposed initial public offering. State Bank of India holds a 74 per cent stake in the company and private equity major Carlyle the balance. The issue is likely to be a combination of primary and secondary issue of shares, with a partial exit by both SBI and Carlyle. According media reports, the IPO size could be about ₹7,000 crore.

HDB Financial Services

HDFC Bank plans to come out with an initial public offering for its non-bank lending arm, HDB Financial Services this fiscal year. The largest private sector lender could raise about ₹7,000-8,000 crore through the issue. HDFC Bank has reportedly appointed Bank of America Merrill Lynch and Morgan Stanley to manage the public issue of HDB Financial.

UTI Asset Management

UTI Asset Management, whose shareholders include State Bank of India, Life Insurance Corp of India, Bank of Baroda and Punjab National Bank, has appointed investment bankers to manage its ₹1,200-crore share sale. Existing shareholders plan to sell a combined 30 per cent stake in the proposed offering.

Suryoday Small Finance Bank

Suryoday SFB announced its plans to raise up to ₹1,000 crore through an IPO by mid-2020. It will prepare the process for the IPO by December. The issue will consists of a fresh equity infusion of about ₹600 crore and an offer-for-sale of ₹400 crore.

RailTel

The Government has invited bids to appoint a Registrar for the proposed divestment in RailTel Corp of India. The Centre plans to raise over ₹300 crore through an IPO. Last December, the Union Cabinet approved the IPO of RailTel Corporation India by diluting up to 25 per cent of the Government of India’s stake. The Miniratna PSU is one of the largest neutral telecom infrastructure providers in the country, with an optic fibre network on exclusive Right of Way (RoW) along railway tracks.

Ujjivan Small Finance Bank

Ujjivan SFB has already begun groundwork for its IPO and had received SEBI’s approval for its ₹1,200-crore issue. Ujjivan Financial Services is the holding company of Ujjivan Small Finance Bank. Ujjivan Financial Services has to list the small finance bank arm by January as mandated by the Reserve Bank of India. In September, the bank’s board had approved the proposal for an IPO. The small finance bank is 100 per cent owned by its holding company, Ujjivan Financial Services.

In a recent clarification on RBI observations, Ujjivan Small Finance Bank said that it has taken steps to address issues ranging from violation of priority sector lending guidelines to lack of a system to detect fraud.

Equitas Holdings

Equitas Holdings has also initiated the process for its Equitas Small Finance Bank's ₹1,000-crore IPO. The move comes after Equitas Holdings’ earlier move to reverse-merge the small finance bank to meet mandatory listing requirements was rejected by SEBI. The parent is looking to list the arm by March 2020. Equitas Holdings was told to resubmit small finance bank's initial public offering draft paper.

It may be recalled that after the small bank failed to meet the deadline to list its shares per the licence agreement, the Reserve Bank of India had refused to extend the deadline and barred it from opening new branches till further orders.

CSB Bank Ltd

CSB Bank (formerly Catholic Syrian Bank) has received approval from SEBI for its initial public offering through the fresh issue of equity shares and offer for sale. It has been widely reported that the Kerala-based CSB Bank may launch its IPO this month. Last year, Canadian billionaire Prem Watsa-owned Fairfax India Holdings Corporation had invested $60.2 million (approximately ₹440 crore) in CSB Bank. Reports indicate that the Bank will launch its roadshows for the proposed IPO soon.

Bajaj Energy

Bajaj Energy has received SEBI's nod for its IPO. The issue comprises fresh issuance of shares worth ₹5,150 crore and an offer-for-sale of ₹300 crore by its promoter Bajaj Power Ventures.

PNB MetLife

Punjab National Bank (PNB) is keen on launching PNB MetLife's initial public offering in the current financial year. PNB owns 30 per cent of PNB MetLife, while MetLife holds a 26 per cent stake (indirectly), and 44 per cent is owned by other shareholders, including Jammu & Kashmir Bank. After the IPO, PNB will own 26 per cent while MetLife will have 25.64 per cent and public investors, 24.64 per cent. PNB MetLife will receive no proceeds from the IPO. However, the timing of the issue is not known.

Other IPOs

IREDA has, for the second time, received approval from SEBI for its proposed initial public offer.

While the government plans to divest up to 25 per cent stake in the Tehri Hydro Development Corp Ltd through an initial public offering, the National Commodity and Derivatives Exchange’s ₹400-500 crore issue is also on the horizon.

The latest entity seeking to launch an IPO is Burger King India. The fastest-growing quick service restaurant chain filed its draft prospectus for an initial public offering with SEBI on November 4. The IPO, a combination of a fresh issue and offer for sale, is seeking to raise ₹400 crore as fresh capital. Promoter QSR Asia Pte Ltd will partially exit the company via an offer for sale of 6 crore equity shares.

Meanwhile, Reliance General Insurance Company has withdrawn its IPO without citing any reasons.

Published on November 05, 2019
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