With the payments major Paytm board reportedly approving a bumper share sale plan running north of Rs 22,000 crore, the IPO market is set for a big days as over a dozen financial services players, including fintechs, are set to mop up over Rs 55,000 crore this fiscal from the market, say investment bankers. With more than a dozen insurance, asset management, commercial banking, non-banks, microfinance, housing finance and payment bank players already filing draft documents with the market regulator Sebi for public offerings, the financial services sector is set to dominate the primary issues or initial public offerings (IPOs) over the coming months.
Some of those who have already filed the draft red herring prospectus (DRHPs) with the Sebi include Aadhar Housing Finance (Rs 7,500 crore), Policy Bazar (Rs 4,000 crore), Aptus Housing Finance (Rs 3,000 crore), Star Health Insurance (Rs 2,000 crore), Aditya Birla Sun Life AMC (Rs 1,500-2,000 crore) Arohan Financial Services (Rs 1,800 crore), Fusion Microfinance (Rs 1,700 crore), Fincare Small Finance Bank (Rs 1,330 crore), Tamilnad Mercantile Bank (Rs 1,000-1,300 crore), Medi Assist (Rs 840 crore) and Jana Small Finance Bank (Rs 700 crore), among others. And the board of the biggest payments bank Paytm has reportedly cleared an over Rs 22,000 crore IPO, seeking to collectively garner around Rs 55,000 crore from the public.
If materialised, the Paytm issue will be the largest IPO ever in the country, eclipsing the hitherto largest issue — the Rs 15,000-crore share sale by the government in national miner Coal India in October 2010, says investment bankers seeking not to be quoted. Investment bankers and analysts consider the IPO boom to be reflective of the ongoing bull run and thus advice retail investors to be cautious while parking money in new companies.
V K Vijayakumar, chief investment strategist at Geojit Financial Services in Kochi, said the performance of the IPO market usually has a strong correlation to the performance of the secondary market. “If the stock market is bullish, it attracts a large number of investors into IPOs. Particularly, new investors lured by high potential profits, get attracted to new offers and the IPO market has always done well during market booms, Vijayakumar told PTI .
Rupen Rajguru, head of equity investments and strategy at global wealth management firm Julius Baer in Mumbai, concurs and cautions retail investors to investors to study the valuations very carefully before investing as the market is a but over-heated now.
“The current IPO market buoyancy is expected to continue into the next few quarters. IPOs are in fact, playing on the financialization of savings theme, which is a big structural shift in the country,” Rajguru told PTI from Mumbai.
He said Julius Baer at the global level is “bullish on India as it considers it to be one of the preferred emerging markets after China”.
Though stating that the present bull market provides a favourable setting for IPOs, Vijayakumar also cautioned retail investors to be careful while applying for IPOs as some of the recent IPOs got listed at a huge discount to the tune of 30-40 per cent below the issue price. Kalyan Jewellers and Suryoday Small Finance Bank are even now quoting at a discount to the issue price, he said.
“Promoters and merchant bakers have a responsibility to price the issue reasonably to leave something on the table for retail investors. Aggressive pricing will be damaging to all,” Vijayakumar warned.
Pointing out that even good issues will be impacted by an adverse market, he said since markets are overvalued now, there is a possibility of a sharp correction. If IPOs are to sail through even under difficult market conditions, the pricing has to be right, he said.
Apart from traditional financial services players, several digital payment and fintech players are also planning to tap the IPO market.
Digital payments major Paytm board has approved a proposal to raise over Rs 22,000 crore from IPO, while online insurance platform Policy Bazar is also looking to float a Rs 4,000-crore offering, say industry sources.
Two small finance banks — Jana SFB and Fincare SFB — have also filed their draft papers with the markets watchdog. While Fincare is planning to mop up Rs 1,330 crore through public offering, Jana is looking to raise around Rs 700 crore.
Aditya Birla Sun Life AMC, the largest non-bank sponsored AMC, is looking to go public with Rs 1,500-2,000 crore offering. With an AUM of Rs 2.7 lakh crore, this is among the top five asset managers and will become the fourth AMC to get traded on the domestic bourses.
From the insurance sector, there are two IPOs — Westbridge Capital and billionaire investor Rakesh Jhununwalla-backed Star Health & Allied Insurance, and the largest health benefits administrator Bengaluru-based Medi Assist TPA.
Medi Assist has filed IPOS papers last month to raise around Rs 840 crore and it will be the first IPO by an insurance TPA (third-party administrator), while Star Health is firming up a Rs 2,000 crore issue.
Private equity firm Blackstone-backed Aadhar Housing Finance and Chennai-based Aptus Housing Finance are also looking to raise Rs 7,500 crore and Rs 3,000 crore respectively through IPOs.
Microfinance players like Arohan Financial Services, Fusion Microfinance and digital debt platform Northern Arc are also looking to hit the IPO market.
The southern Tamil Nadu-based old generation private sector lender Tamilnad Mercantile Bank is also planning a Rs 1,000-crore issue before the end of the calendar year, according to sources.