IPO rush in market despite pandemic

Record contraction in the country's GDP and steep rise in Covid-19 cases notwithstanding, India's stock markets are buoyant. From a multi-year low of 25,981 points on March 23 this year after Sensex crashed by a mind-numbing 3,935 points on that dreadful day, the benchmark index bounced back with vengeance and embarked on a long rally that pushed it to 39,044 pts as on September 15. Sensex zoomed by a whopping 13,000 points in that period. Of course, stock markets have been heading south in the past one week, culminating in Sensex's 812 point crash on Monday to 38,034 points. It also ended in red on Tuesday.

But barring occasional declines in benchmark indices, markets continued their upward trajectory despite steep rise in Covid-19 cases in the country. Markets remained undeterred even though the country's GDP contracted by a staggering 23.9 per cent in the first quarter (April-June 2020) in the current fiscal.

Encouraged by steady rise in key market indices amid low volatility, companies seem to be in a hurry to tap the primary market. That's the reason why initial public offerings (IPOs) are hitting the market at regular intervals in the last few weeks.

Of course, there is pent up demand for IPOs as well, as no company went public during the first quarter due to lockdown and other Covid-related restrictions. Though July witnessed one IPO by a biotech company which raised Rs 496 crore through its initial offer, the primary market again remained silent in August. But September seems to be the busiest month so far this financial year when it comes to initial public offering. So far, this month has witnessed two successful IPOs. Happiest Minds Technologies got listed last week while Route Mobile hit the bourses on Monday. Three more initial offers hit the primary market this week. Among them is Angel Broking, a leading stock brokerage firm, which has come out with Rs 600-crore IPO. Further, two more IPOs are currently in pipeline and may hit the market soon.

One is that of UTI Mutual Fund, the country's oldest mutual fund house. The other one is Mazagon Dock Shipbuilders, a public sector unit that builds warships and submarines. In 2020, four companies raised Rs 12,150 crore through IPOs so far. But SBI Cards which went public in early March this year accounted for a lion share as it raised Rs 10,355 crore. Three other companies cumulatively mopped up Rs 1,798 crore. In this period last year, 16 IPOs hit the market, raising Rs 12,000 crore.

With all three IPOs which hit the market post the lockdown, turning out to be successful, more companies are likely to tap the primary markets later this year. It is said that a large number of new retail investors came into the market in the last five months. That's what the market rally in recent months indicates. These new retail investors also played a key role in the success of recent public issues.

However, rising Covid-19 cases will definitely weigh on the stock markets. Delay in Covid vaccine may further dampen the market sentiment. If that happens, IPOs may also face problems. But as of now, the stock market seems to be a happy hunting ground for those companies which look to go public.