Despite the covid-19 pandemic slowing down primary market activity from its first quarter boom, Indian companies continue to line up for initial public offerings. According to data from primary market tracker Prime Database, companies have filed draught red herring prospectuses (DRHPs) for nine IPOs totalling nearly Rs 19,660 crore (approximately $2.66 billion) since April 1, 2021.
The primary market has been put on hold. Though 16 companies went public in the first quarter of the calendar year, Macrotech Developers Ltd. was the only one to do so in April. Companies who were planning an IPO have not held back, according to bankers, and are continuing to file DRHPs so that they will be ready as the second phase of the pandemic passes and markets become more conducive to IPOs.
“A sizable IPO pipeline has expanded in the last three months. The firms that have registered in the last few weeks have all spent three to six months working on their draught prospectuses. Although work on new deals has slowed, businesses that are nearing the end of the process are not looking to postpone their IPOs and are continuing to file the prospectus” mentioned by a Mumbai-based investment banker, who did not wish to be named.
Additionally, “the market will remain choppy due to the ongoing second wave of the coronavirus pandemic, but there will be windows of opportunity to launch deals, as we saw in March when nine companies hit the IPO market. The idea is to file your document with the Securities and Exchange Board of India, get the regulator’s approval, and then wait for the markets to settle before launching your offer.”
Zomato Ltd, which plans to raise Rs 8,250 crore, Chemplast Sanmar Ltd, which plans to raise Rs 3,500 crore, and Aditya Birla Sunlife AMC Ltd, which plans to raise Rs 2,000 crore, are among the companies that have filed draught prospectuses with the market regulator in the last few weeks.
On the condition of anonymity, a lawyer representing a couple of companies working on their IPOs said, “Many more companies are working on their documents and they will be filing shortly.” Thanks to the continuing second round, the regulator is also taking longer to clear IPOs. As a result, people want to register as soon as possible, in order to receive approval in time and be ready to take advantage of any opportunity that occurs in the coming months.
According to Pranav Haldea, managing director of Prime Database, Indian primary market operation will remain subdued as long as financial markets remain volatile due to the pandemic. The essence of primary markets is that they are highly sensitive. It just takes a few seconds for them to shut down. There has been a lot of volatility in the market, and there is no direction in the market because the economic effect of the second wave is still unknown. Before we can see any transactions being launched, the secondary markets must first stabilise.
