India’s Great IPO rush: Investors look to tap a sparkling market

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Wearing only a saffron-colored dhoti and taking a yoga pose, India’s most popular yoga evangelist Swami Ramdev surprises his followers in a yoga session: “Do you want to be a millionaire? I will give you the mantra to become a millionaire. First open a demat account to trade in the stock markets and when I tell you, buy Ruchi Soya shares. Then invest in Patanjali Ayurved which has brand value and market cap in thousands of crore and you can get it verified with any agency in the world. If you buy Ruchi Soya shares now, no one can stop you from becoming a millionaire and I can guarantee that.

The advice in chaste Hindi, broadcast live on television to millions of his followers last month, was not disinterested. Ramdev is a non-executive director of Ruchi Soya Industries, which manufactures food and cooking oils, and his family owns Patanjali Ayurved, his unlisted holding company. Patanjali is set to sell part of its 98.9% stake in Ruchi Soya in a follow-up public offering, raising 45 billion rupees ($ 608 million).

The politically connected yoga guru isn’t the only one touting an equity deal right now. Business owners, from billionaire tycoons and venture capitalists to the Indian government, are planning share sales – although they are likely to be marketed through more conventional channels.

Indian stock markets are experiencing an unprecedented boom, fueled by an influx of new retail investors and optimism about the country’s economic recovery. This sent the benchmark BSE Sensex to a record high of over 60,000 points last week and opened a window of opportunity for Indian companies to raise funds to reduce debt and plan for new ventures.

“Some companies are reducing their debt, while others need growth capital. Some companies just want brand visibility and some investors just take the money out, ”said Motilal Oswal, president of Motilal Oswal Financial Services, a Mumbai-based brokerage and mutual fund company. “The maximum fundraising happens when the markets are strong. “

India’s most popular yoga evangelist Swami Ramdev is a non-executive director of Ruchi Soya Industries © Hindustan Times via Getty Images

As part of the Great Indian IPO Rush, companies as diverse as edible oil vendors and hotel booking apps are launching offers in the coming months. So far, 41 Indian companies have already raised 669 billion rupees in 2021, a huge jump from the 266 billion rupees raised by 15 companies in the last year and on the verge of breaking the record for the year. calendar year of 671 billion rupees raised by 36 companies in 2017.

And the pace is picking up. More than 60 other companies have filed for IPO. Records kept by research firm Prime Database suggest that in the current fiscal year ending March 2022, Indian business fundraising will exceed Rs1tn.

India Stock Exchange

A signal that sellers will be given a welcome welcome came when Ant Group-backed food delivery company Zomato raised Rs 90 billion in July, with an offer 38 times oversubscribed. Since then, Zomato’s market valuation has crossed Rs1tn to Rs138 per share – far higher than its IPO price of Rs76 per share.

Start-ups that have followed it into the market include Oyo Hotels, backed by SoftBank, and another company owned by Ant Group, One97 Communications, which offers payment systems for online purchases under the Paytm brand.

A Zomato delivery man on a motorcycle

Ant Group-backed food delivery company Zomato raised Rs 90 billion in July © NurPhoto via Getty Images

The Indian government, which owns companies in critical industries ranging from airlines to logistics to ports, is also planning IPOs. He intends to sell up to 10 percent of Life Insurance Corporation of India (LIC) to raise up to Rs 900 billion in the country’s largest IPO. Proceeds from the sale of shares and other privatizations of Hindustan Copper, Bharat Petroleum and Air India will be used to fill a financial gap and fund social programs that squeeze liquidity.

This article is from Nikkei Asia, a global publication with a unique Asian perspective on politics, economics, business and international affairs. Our own correspondents and external commentators from around the world share their perspectives on Asia, while our Asia300 section provides in-depth coverage of 300 of the largest and fastest growing listed companies from 11 economies outside of Japan. .

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Indian billionaires are also embarking on the boom. The Aditya Birla group, owned by Kumar Mangalam Birla, raised Rs 27.7 billion by listing its mutual fund business on October 11. Birla’s joint venture partner, Sun Life of Canada, is also divesting a portion of its stake. The company is expected to receive a valuation of up to Rs250bn.

Gautam’s Adani group Adani has asked the stock market regulator to list his own cooking oil company, Adani Wilmar, a joint venture with Wilmar International of Singapore, to raise up to Rs45bn.

India’s largest group in terms of market valuation, Reliance Industries, owned by India’s richest man, Mukesh Ambani, has not one but two open deals. It plans to list its mobile phone company Reliance Jio – offering an exit option to early stage investors like Google and Facebook and private equity firm KKR – and its retail arm Reliance Retail. The company has not yet finalized the dates for the IPOs.

Bankers said BSE Sensex’s new all-time high and strong performance from recent IPOs bode well for those considering listing. Large cash flows from foreign and local investors, rising corporate profits, falling Covid-19 cases and low costs of capital have all contributed to the vibrant atmosphere.

A man walks past a Reliance Jio store

Reliance Jio listing will offer exit option to early stage investors like Google and Facebook and private equity firm KKR © NurPhoto via Getty Images

“Dramatic average day 1 trading gains attract participation from institutional investors, high net worth individuals and retail investors,” said Atul Mehra, Managing Director and Co-Managing Director of Investment Banking at JM Financial .

But some experts warn that the valuations of some companies have reached alarming levels. The price-to-earnings ratio on the BSE Sensex is currently around 31, and other than a brief moment at the peak of the dotcom boom, you have to go back to the mid-1990s to see numbers consistently above 30. The p / e The ratio peaked at 36 in February this year before profits improved.

“Given the rich valuations, one cannot ignore the intermittent volatility,” Oswal said. “However, we expect the positive momentum to continue as economic activity improves and corporate profits recover.”

India's current IPOs

Meanwhile, retail investors old and new, those who have become addicted to trading stocks through mobile phone apps and veterans, continue to buzz about the upcoming hit announcements. “The music is on and I don’t think the party will be over anytime soon,” said Pavan Dharnidharka, a 70-year-old Mumbai-based small investor who started trading in 1977 and has retired from a company. of scholarship a decade ago. “We are preparing to see the Sensex at 100,000,” he added.

As for Ramdev, the yoga guru, his TV pitch caught the attention of the market regulator, the Securities and Exchange Board of India. He warned him on September 30 not to give investment advice with a stock sale imminent.

A version of this article was first published by Nikkei Asia on October 11, 2021. © 2021 Nikkei Inc. All rights reserved

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