As India Heads to 2019 General Polls, Will the IPO Market Continue to Bloom?
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It’s raining IPOs in India – It’s not just us but the whole industry agrees to this. According to EY report, globally India has registered the highest number of IPOs in the first of half of 2018 as 90 companies raised INR 26,707 crore.
The IPO market is booming since the second half of 2014, the time when the present Prime Minister Narendra Modi-led NDA Government came into power.
Between June 2014-June 2018, 370 companies raised about INR 4,050 crores from the SME platforms, while 112 firms raised approximately INR 120,000 crores from the mainboard.
Even the benchmark indices have continued to outperform, with National Stock Exchange’s Nifty and BSE’s Sensex registering a growth rate of about 40 per cent, during the above mentioned period. Pankaj Karde, Head-Institutional Sales and Sales Trading, Systematix Shares feels,” after a very long time, the domestic investor has become more powerful than the FIIs”.
“Domestic investors are continuous buyers at a time when FIIs were selling record Indian equities. Mutual funds have seen record inflows and SIP has seen growth month on month,” Karde pointed out.
While experts believe the boom in Indian capital market has a lot to do with improved investor sentiment, ease of doing business and policy reforms like GST, the question is - considering India is less than a year away from the general elections 2019, is it the right time for companies to go for an IPO?
Like we mentioned earlier, India is edging close to Lok Sabha election and the poll cycle directly translates into uncertainty. But Amishi Kapadia, Senior President & Global Head, YES Securities feels India’s growth story will remain intact irrespective of the outcome of the elections.
“In the period prior to elections, the markets usually witness volatility and therefore most IPOs would like to hit the markets before this happens,” she said to Entrepreneur India while adding that, “GST has benefitted many companies as there has been value migration from an unorganised sector towards the organised sector.”
However, as far as IPO’s are concerned, Guiness Securities thinks good companies with attractive valuations and with a strong promoter patronage is a definite buy.
Soumen Chatterjee, Director, Guiness Securities says “Fundamentally strong companies are always going to reward the investors irrespective of the market scenario. Hence, we suggest investors should invest in an IPO for a longer time frame rather than speculating just for listing benefits.”.
Even Kharde’s opinion echoed with Chatterjee, as the broker feels IPOs in the domestic consumption space will continue to attract demand.
“One needs to understand that the investor is now very vulnerable for high valuations. A good company with proven track record and management bandwidth should not find an issue to come up with an IPO,” he added.