The calendar year 2021 has been an active year for IPOs. In the first six months, a total of 23 IPOs hit the market collecting a total sum of Rs.32,000 between them. All that is likely to change in the month of July. Going by the initial estimates, it looks like close to Rs.31,800 crore would be collected just in the month of July. We are not even counting the big multi-billion dollar IPOs in the Indian market like Paytm and LIC, which are scheduled towards the latter part of this fiscal year. But even July is not a quiet month with over 12 public issues slated to hit the market and nearly Rs.31,800 crore likely to be collected.
July could be the month of the IPO shift
If you an Indian IPO buff, July 2021 could be a fantastic month considering the choice that you will get in the IPO market. Ironically, the month of July alone is likely to collect equal the total collections in the first six months of the calendar year 2021. While two IPOs are opening on the 07 July, there are 10 more IPOs slated for the month of July, including 3 mega IPOs with an IPO size of more than Rs.5,000 core. Here is a quick run in.
If all the 12 IPOs slated for the month of July 2021 go through as planned, we could have a situation wherein close to Rs.31,813 crore would get collected via the IPO route. As we said earlier, this does not even include the likes of Paytm and LIC slated to hit the IPO market before the end of fiscal 2022. There is one more interesting trend for the month of July. The 12 IPOs are spread across 9 different industry segments. It is not a case of too many companies in a sector trying to ride a macro trend. There are IPOs across sectors and sub-sectors ranging from financials to chemicals to life sciences and even ecommerce. Let us focus on a handful of big IPOs that are likely to define the month of July 2021.
Nirma returns, Blackstone monetizes; but can Zomato deliver
That just about sums up the big IPO story of July 2021. Out of the total amount of Rs.31,980 crore that is likely to be raised through the IPO route in July 2021, just 3 IPOs will account for 65% of the funds raised. Let us focus on these 3 mega IPOs.
- Nirma makes a comeback almost a decade after it voluntarily delisted. The detergent business of Nirma does not plan to list but the cement arm of Nirma will hit the IPO market under the brand name of Nuvoco Vistas. Now Nuvoco Vistas was formed bymerging the cement interests of Nirma with the Indian operations of Lafarge and the cement business of Emami of Kolkata. With all these inorganic acquisitions, Nuvoco Vistas was left with a combined cement plus grinding capacity of 23.54 MTPA. The Rs.5,000 crore IPO from Nuvoco Vistas will give a partial exit to Nirma, but will also raise funds for the company’s expansion. After all, cement is currently in a sweet spot with robust sales, elevated demand and comfortable margins.
- Blackstone PE will use the IPO route to take partial exit from Aadhar Housing Finance. Aadhar Housing Finance is an extremely niche player and one of the few housing finance companies that is entirely focused on low-income housing segment. Blackstone continues to be very positive on this segment due to the government of India’s housing for all program. Blackstone has 98.7% in Aadhar Housing Finance and this will come down post the issue.
- The big test of Indian IPO markets will be Zomato, which could hit the market with a Rs.8.250 crore. Interestingly, Rs.7,500 crore out of this will be by way of fresh issue and only Rs.750 crore will be an OFS to give partial exit to Info Edge. Zomato will be the test because Indian investors are not attuned to investing heavily into loss making companies.
- Apart from the Big-3 IPOs above, there are a number of other IPOs to capitalize on key market trends. For example, Vijaya Diagnostics of Chennai will follow up with an IPO to ride on the success of KIMS. Glenmark will use the current attractiveness of APIs to hive off its API business in the form of Glenmark Life Sciences through a monetizing IPO. Above all, there are the likes of Ami Organics and Clean Science looking to ride the specialty chemicals story. In short, it is going to be a busy July 2021 for IPOs.
Some risks to watch out for in July 2021
An IPO boom of this size is not without risks. Firstly, a couple of IPOs disappointing on listing can change the undertone of the market. Secondly, the HNI and retail demand will be lower when so many IPOs are bunched. That could result in less attractive GMPs. Lastly, as euphoria builds up, IPOs are likely to get pricier. That is normally a big risk for IPO markets.