The primary market is set for a Rs. 80,000 crores bonanza, with 30 businesses that have already filed IPO papers for a total of Rs. 55,000 crores, and another ten expected to file this month for a total of Rs. 25,000 crores. On the basis of a huge lot of investors — the vast majority of whom are first-timers — and a torrent of liquidity, the market has been on a nonstop rally, setting new highs practically every week.
In FY21, foreign funds alone invested a record $35 billion in the market, and the trend has continued this fiscal year. Domestic institutions, led by LIC, have also injected trillions of rupees, assisting in the wooing of individual investors in droves — over 20 million new investors entered the market last year.
2021 is expected to be a record year for fundraising through initial public offerings, with Rs. 27,426 crores raised from 22 issues so far this year. 16 issues raised Rs. 26,628 crores in 2020, and a similar number of IPOs raised Rs. 12,687 crores in 2019, but 2018 was the strongest year for the primary market so far, with 25 businesses raising Rs. 31,731 crores.
Further Key Takeaways
SEBI expects roughly ten companies to file IPO filings this month. Star Health & Allied Insurance, Northern Arc, Sapphire Foods, Sahajanand Medical Technologies, Fino Payments Bank, Paytm, Ixigo, VLCC,, Lava International, and Veeda Clinical Research are among the companies that are looking to raise Rs. 25,000 crores.
Paytm, the nation’s biggest digital payments company, is planning to launch an IPO for over Rs. 18,500 crores, with papers expected to be filed this month. If completed properly, this will be the country’s largest issuance after the Rs. 15,000 crores Coal India offer in October 2010.
Businesses are likely to benefit from robust liquidity and a positive secondary market, which has witnessed substantial growth in new retail buyers’ numbers. In addition to the rising active involvement of regular investors, SIPs continue to provide strength to mutual funds. We’ve seen significant traction with the foreign investors, who are becoming quite positive about India, particularly the larger issuers, as a result of increased global liquidity.
Unprecedented participation in IPOs over the last two years has been observed, including HNI segments and retail, with tremendous over-subscription across the sectors and issue sizes. This was due to a structural shift in retail investors’ risk appetite, supported in part by lower deposit interest rates, a maturing investing ecosystem, and demographic shifts, with today’s millennials prepared to accept more risks. Many believe there will be strong participation in next issues if markets remain buoyant.
What are the Causes for the Increase in Funding?
Macro considerations played a significant effect in the outcome. Investor confidence was bolstered by the boom in public markets headed by the United States. Investors were also able to keep their risk investment funds due to low interest rates. The most important factor was that pandemic-accelerated digitization across all industries. Digital education, enterprise software, content, and logistics benefited the most, while cab and bike aggregators, as well as financial technology, struggled to raise funds.
What Does the Future Hold for Startups for the Rest of 2021?
Because of the excess of accessible capital, startup funding may remain strong for the time being. Sectors like digital education, content, and software will thrive until pandemic prevents a total return to normalcy. Others, such as consumer transportation, will only pick up once the pandemic has passed. The success of proposed initial public offerings by prominent entrepreneurs, the performance of companies that have raised large sums of money, and the strength of consumer demand will all affect funding in the future.
What’s the Big Deal About Sudden Surge in IPOs?
For startups, initial public offerings (IPOs) are the holy grail. However, with the exception of a few notable exceptions such as Makemytrip and Indiamart, Indian startups have yet to go public. Companies have established shaky business models that have resulted in massive annual losses. That is beginning to change, however slowly. A few lucrative companies have announced ambitions to float their shares on the stock exchange in the near future. If they are successful in their IPOs, it will be a watershed moment for Indian startups, resulting in greater funding.
Should Retail Investors Pay Attention to Institutions?
Large financial institutions will be able to value companies better since they have more analytical capability and access to management. As a result, institutional investors’ high oversubscription is a good indicator. Continued institutional demand is also a factor in stock market gains following listing. This is not, however, a flawless method. Retail investors can follow institutional activities, but they must perform their own research. When an issue is significantly overloaded, the chances of acquiring an allotment decrease as well.