Public listing saw huge participation in 2020 as the primary markets recouped after a three-month lull because of disruptions and volatility in the stock market caused by the coronavirus outbreak. However, most of the money raised through the initial public offerings (IPOs) were used to provide an exit to private equity (PE) players or existing shareholders.
As much as 53% of money raised via IPOs in 2020 were meant for PE or venture capital (VC) exits, which was at least at a five-year high compared to 24.36%, 29.09% and 26.72% in 2019, 2018 and 2017, respectively, as per Prime database.
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Despite the business uncertainties as a result of the covid-19 pandemic, the 15 IPOs raised ₹26,611 crore this year, up 115% compared to ₹12,362 crore across 16 IPOs in 2019. Of this, ₹14,101 crore was for PE/VC exits, while the rest was for fresh issue of shares meant for capital expansion. In comparison, PE/VC exits accounted for ₹3,011 crore in 2019, ₹9,006 in 2018 and ₹17,943 crore in 2017.
“PE exits in companies through public offer has been a continuing trend in Indian IPOs for the last 6-7 years. This is a global phenomenon and indicates a maturing capital market with VC/PE investors providing the early-stage risk capital,” said Pranav Haldea, managing director, Prime Database group.
PE/VC investors had backed five of the 15 companies that hit the market with their IPOs in 2020. Thirteen firms had anchor investors, who collectively subscribed to 29% of the total public issue. Domestic institutional investors (DIIs) also played a significant role as anchor investors, with their subscription accounting for 13% of the amount.
The largest IPO in 2020 was that of SBI Cards and Payment Services Ltd at ₹10,341 crore. US-based PE firm Carlyle Group Inc. sold its 10% stake in SBI Cards during the IPO. Other big-ticket public issues were of Computer Age Management Services Ltd, or CAMS ( ₹2,244.33 crore), UTI Asset Management Co. Ltd ( ₹2,159.88 crore), and Gland Pharma ( ₹6,479.55 crore).
There was huge investor interest for nine IPOs, with the issues oversubscribed more than 10 times. They include Mazagon Dock (156 times), followed by Mrs Bectors Food Specialities (138 times), Chemcon Speciality Chemicals (102 times), Burger King (86 times), Happiest Minds Technologies (82 times), Rossari Biotech (55 times), Route Mobile (52 times), CAMS (33 times), and SBI Cards (19 times).
“In the second half of 2020, large IPOs of more than ₹1,000 crore were the flavour of the season with the largest IPO being that of Gland Pharma. The market witnessed IPOs from covid-19-resilient sectors such as technology and specialty chemicals, but as the markets turned positive the excess liquidity and positive sentiment caused even covid-impacted companies to raise funds or public listing,” said Kotak Investment Banking.
Both foreign institutional investors and DIIs agreed to participate in pre-IPOs such as those of CAMS, Rossari, and Burger King. Kotak Investment Banking said the trend may continue as this is a win-win for both firms and investors.
IPO activity is expected to be dominated by resilient sectors such as new-age tech and healthcare. Recovering sectors such as hospitality, commercial real estate, and banking, financial services and insurance may also do well, it said.