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<\/p>\nDraft Red Herring Prospectus (DRHP) filing continued to be robust in October, signifying the optimism in the initial public offer (IPO) market despite the recent turbulence in equities.<\/p>\n
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In October, 17 companies filed their offer documents for IPOs.<\/p>\n
The rush in filings has made August-October 2023 the best three-month period for DRHP filings since July-September 2021.<\/p>\n
Over 13 and 19 DRHPs were filed in August and September this year, respectively.<\/p>\n
DRHP is a preliminary prospectus filed before an IPO containing key details such as the number of shares offered, financial results, and risk factors.<\/p>\n
Those who filed their offer documents in October include Capital Small Finance Bank, Popular Vehicles and Services, and Inox India, among others.<\/p>\n
The filings have remained robust despite the foreign portfolio investor outflows (FPI) and decline in benchmark and small and midcap indices in October.<\/p>\n
This month, the Nifty fell by 1.8 per cent, the Nifty midcap 100 by 4.2 per cent and the Nifty Small Cap 100 by 2.2 per cent, respectively.<\/p>\n
FPI were net sellers to the tune of Rs 7,477 crore.<\/p>\n
Bankers said that though the markets are turbulent, the overall outlook for Indian equities is bullish.<\/p>\n
Moreover, most IPO-bound companies are from the small or mid-cap space.<\/p>\n
Typically, FPIs invest in companies with a $1 billion-plus market cap.<\/p>\n
Bankers say you can manage an issue of up to Rs 1,200 crore without significant foreign participation.<\/p>\n
“This is the market where small and midcap IPOs are getting done.<\/p>\n
“There is a strong demand from investors, especially domestic investors, for good quality companies in this space.<\/p>\n
“It’s good to have a new paper coming in when the flows are strong, the index has peaked, and valuations are rich across sectors.<\/p>\n
“Probably over time, we will see large-sized issuances,’ said V Jayasankar, managing director at Kotak Investment Banking.<\/p>\n
Jayasankar added that globally, markets are volatile, though India is in the sweet spot.<\/p>\n
“Global macros are poor. Interest rates, inflation, and crude prices are high.<\/p>\n
“And growth is yet to pick up.<\/p>\n
“That is the reason why market sentiment is different from large-sized IPOs.<\/p>\n
“There is balanced interest between foreign and domestic investors when it comes to a large-sized issue, but for small and midcap issuances, it’s skewed towards domestic.”<\/p>\n
Going forward, IPO filings are likely to be robust and are likely to be dominated by mid and small-cap firms.<\/p>\n
“2022 was a difficult year. Many of them could not finish their IPOs.<\/p>\n
“Those firms might try their luck this year.<\/p>\n
“We have seen robust foreign investor demand for the follow-on issuances of well-established companies.<\/p>\n
“But IPOs are a different ball game. When the markets are challenging, they would rather stick to companies they have tracked and know well,” a banker said.<\/p>\n