IPO MARKETS - ALL THE MASALA IS HERE!

While we cannot seem to get enough of the secondary markets, which seems to be heading into newer heights almost everyday, the primary market is the one which holds a lot of promise this year, 2020.

LIC listing plans might have caught our attention but there are so many others too who are queuing up, notwithstanding the poor response received by ITI – it extended its closing date once again to today, 5th Feb. The issue was to close on 28th Jan, it was extended till 31st Jan with a downward price revision marginally to Rs.71-77 (from 72-77 earlier). Even that was not enough so the closing had to be extended further.

ITI is a thing of the past but this year, it looks like its going to be a vavavoom year for the IPOs.

The towers unit of Reliance Jio, on 13th Jan filed for a private InvIT – these are instruments that work like mutual funds. InvITs are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time. Priced at Rs.100/unit it wants to bring in Rs.25,215 crore. This is an agreement it entered into with  Canadian Brookfield Infrastructure Partners LP and its institutional partners. It has already got the CCI approval for the same and there is now talk of an IPO soon. This the single largest foreign investment in an Indian infrastructure vehicle but it does not mean that the tower unit will get listed but Jio can. As per the Finance Bill, Sebi has done away with the mandatory listing requirement for InvITs.

So anticipation over Jio apart, there are many companies which have filed their offer documents with SEBI. Stove Kraft Limited filed one on 3rd Feb and its size is expected to be around Rs.500 crore. Likhitha Infra, Indian Railway Finance Corp, Computer Age Management, ESAF Small Finance Bank, Apeejay Surendra Park, RO Jewelers, Rossari Biotech, UTI AMC, Equitas Small Finance Bank, ICL Organic Dairy, Easy Trip Planners, SBI Cards and Payments, Puranik Builders, Burger King, Montecarlo, Chemcon Speciality are some of the IPOs which could happen this year.

Well, as we say always, IPO is all about pricing and only pricing. Earlier, minting money in the IPO market, for promoters as well as investors was such an easy task. The dot com boom and then the aqua culture, oil seed companies, textile and NBFCs; these companies made the entire process of making money so easy. But then again, these very same companies made the IPO markets sick, dumping it with poor quality issues, price for which many investors continue to pay.

Somehow, getting the pricing right, even in this age of everything going hi-tech remains elusive. Even Facebook, went on to issue its shares at a very high price and it has been facing the brunt of it. And this was for a company which had so much brand equity and high fancy. And these are precisely the two factors on which companies tend to overcharge.  So the boon becomes the curse for investors.

What the markets and the investors need is a good, fundamentally sound company with an IPO which is reasonably priced. Now that sounds almost like a myth, a figment of our imagination. Investors have the cash and will invest if the offer is good.

Confidence can be built only over a period of time. A few quality issues, priced right, leaving some money on the table for the investor to make will restore the faith back. But will promoters agree to price lower so that investors can gain?  No, they would rather postpone their IPOs.

Needless to say, LIC and Jio, if it happens this year, will burst all IPO myths and retail investors will become a mob!