Among sectors, financials including housing finance and insurance companies, have cornered nearly two-third share, or about Rs 30,000 crore, of the total fund raising thus far in CY17. The companies from the sectors like construction, trading and pharmaceutical raised over Rs 1,000 crore though IPOs.
Analysts say the positive secondary market sentiment has rubbed off on the primary market as well, with 12 out of 24 companies debuting on the exchanges this year listing at over 10% premium against their respective issue price.
"Promoters are making use of the bull run in the secondary market to raise funds via the IPO route. Valuations for a lot of mid-cap companies have improved over time, and promoters are using this opportunity to tap the market for funds, including micro-finance companies, non-banking financial companies (NBFCs) and private banks," explains G. Chokkalingam, founder & managing director, Equinomics Research.
Avenue Supermarts, the owner of the D-Mart brand, Central Depository Services (India) or CDSL, Shankara Building Products, Apex Frozen Foods and PSP Projects have seen their market value more than doubled from their issue price. Dixon Technologies, AU Small Finance Bank, Capacit'e Infraprojects, Housing & Urban Development Corporation and Cochin Shipyard were up in the range of 30% to 65% against their issue price.
With the economic cycle likely to witness an upturn going ahead, analysts expect more companies, especially from the banking and NBFC space to hit the primary market. This, they feel, will also be led by the need for capital for expansion purposes.
"Credit growth is likely pick up over time given the formalisation of the economy. That apart, consumption and penetration levels of corporates (into rural India) are going up. For this, corporates, including banks and NBFCs, will need funds to grow. The unlisted ones, as a result, will tap the markets to meet this requirement," says Vinay Khattar, associate director and head of research at Edelweiss.
On the other hand, big ticket IPOs like SBI Life Insurance Company, ICICI Lombard General Insurance Company and ERIS Lifesciences has underperformed the market by recording single digit or negative return post their listing.
"A lot also depends on the IPO pricing as well. For these insurance companies, the pricing was aggressive and left little for the investors on the table. As a result the IPOs have underperformed at the bourses," Chokkalingam adds.