IPOs back as economic rebound gathers pace

Several companies that had deferred their initial share sale plans because the covid fallout had hammered stock prices are now ready to tap the market again as investor appetite for new share sales is providing them with a window to raise money.

Burger King India Ltd, for instance, filed an update to its draft share sale documents last week and plans to soon meet investors for its proposed initial public offer (IPO).

The fast-food chain had withdrawn plans to launch its initial public offer in March because of the coronavirus outbreak.

Other companies that have refiled documents include Antony Waste Handling Cell Ltd, whose IPO failed to attract investors in March, and Mrs Bectors Food Specialities Ltd, which filed its draft initial public offer documents in August 2018, but never went ahead with the plan.

Several other companies have also decided to test the market.

The rush of initial public offers in September—eight deals in the span of a month—and the high investor demand that these share sales generated, have raised the hopes of many other companies.

Auto parts maker Craftsman Automation Ltd and financial services company Anand Rathi Wealth Management Ltd are among those that are planning to soon refile their share sale prospectus, three people aware of the developments said, requesting anonymity.

“Listing gains seen in some of the recent share sales and a buoyant stock market fuelled by excess liquidity are resulting in companies reviving their initial public offer plans,” said Pranav Haldea, managing director of Prime Database group.

According to a report by consulting firm EY, the second half of 2020 looks significantly better for IPOs.

“IPO’s attraction might continue to allure investors in the primary market after successful IPO subscriptions in recent times. Companies with higher standards of governance, differentiated business models and better financial positioning will find it easier to list. Indian shares have rallied recently, led by upbeat investor sentiment as businesses opened up and economic activities restarted after stringent lockdown restrictions due to the coronavirus,” said Sandip Khetan, partner and national leader, financial accounting advisory services, EY India, in the report.

Many of the initial public offers that were launched in September received strong investor demand and went on to make their stock market debut with hefty listing gains.

Stock prices of Happiest Minds Technologies Ltd, Route Mobile Ltd and Chemcon Speciality Chemicals Ltd were up by 123%, 86% and 72% at the end of their first trading day, respectively.

“There is definitely more hope among the management of these companies. Few of the deals that went through in September, six months ago no one would have thought that these deals could be executed. There is a very strong interest in IPOs, especially from HNIs (high net-worth individuals) and retail investors,” said an investment banker who is advising a few companies that are in the midst of re-filing their draft red herring prospectus.

Emails sent to Anand Rathi and Craftsman remained unanswered.

“On October 21, 2020, Burger King India Ltd filed an addendum to the draft red herring prospectus with Sebi. We are exploring opportunities to raise growth capital to expand the Burger King franchisee in India. Our aim is to expand our presence in India to 700 stores by December 31, 2026,” said a Burger King India spokesperson.