Companies are lining up with Initial Public Offerings (IPOs) in India after the IPO norms were relaxed be SEBI. IPOs amounting to Rs.200 billion are expected to hit the market, which includes big names such as Café Coffee Day, Matrix Cellular and GVK Airport. Few companies have already received the approval to launch their respective IPOs and others are under the process to receive the same. Read Our analysis for upcoming issues in the primary market in the IPO section of the website.
GVK Group plans to list its infrastructure company that deals in providing service to the Mumbai and Bangalore Airports in India. The company is expected to come up with an offer to raise Rs.30 billion. Indigo in the aviation industry is expected to mop up Rs.25 billion along with the famous chain of coffee shops owned by Café Coffee Day Enterprises with a plan to raise Rs.11.5 billion, RBL Bank (formerly known as Ratnakar Bank) at Rs.11 billion and Biocon’s arm Syngene International at Rs.6 billion. Others in the queue include fragrance maker S H Kelkar & Company and infrastructure firm Dilip Buildcon, Amar Ujala Publications – which publishes Hindi daily Amar Ujala, Kalpataru Power Transmission’s subsidiary Shree Shubham Logistics, Prabhat Dairy, Catholic Syrian Bank and Nuziveedu Seeds.
The flurry of IPOs indicates optimism in the primary and secondary markets. However investors need to be careful in understanding the businesses that are expected to list on the stock markets. They should particularly not get carried away by expecting huge listing gains for all the companies that would get listed. They should be selective in their approach in deciding which ones to buy and which ones to opt out. Investors also need to maintain caution if markets become too much euphoric in this time. IPOs normally hit the market when everything is optimistic and issuers are particularly interested in getting the maximum premium for their shares.
IPO provides an opportunity for retail investors to buy shares in the company without any brokerage costs. The ASBA (Applications Supported by Blocked Amount) is a process developed by the India’s Stock Market Regulator SEBI for applying to IPO. In ASBA, an IPO applicant’s account does not get debited until shares are allotted to them. The new IPO norms are however applicable for IPOs that would hit the markets after January 2016.
The retail investor is allowed to apply for a maximum amount of shares amounting to not more than Rs.2 lakh rupees per IPO. The amount gets blocked in that particular IPO and cannot be used in application of any other IPO. The issuing company can even withdraw the IPO if it feels that there is not much demand for its shares in the market or it turns out that sentiments in the market are not favourable for listing on the secondary market. If the IPO is oversubscribed by number of times because of high demand for shares of the company a lottery system is designed to issue shares to investors.