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The animal spirits induced by tax cuts may first show in IPO market

NEW DELHI: A marked shift in market momentum following the corporate tax cuts looks set to revive the otherwise dull primary market.

IRCTC, which manages ticket booking, tourism and catering for Indian Railways, is first to go. The state-run firm will launch its Rs 645 crore issue on Monday.

SAMHI Hotels, the owner of the largest number of Marriott and IHG-operated hotels in India, on Wednesday filed draft papers with market regulator Sebi for its initial public offering.

The much-awaited LIC IPO also is back on the discussion table.

In all, some 39 IPOs are waiting in the wings with necessary Sebi approvals. Out of them, the one-year deadline will expire by December 31 for 21 issues, data available with PRIME Database showed.

“Before the Budget, about a dozen of IPOs were looking to hit the primary market, but the selloff in the market and FPI outflows after the Budget hit such plans. Now, as the ground situation improves, we may see a flurry of issues starting next month. From mid-October till March, we may have a busy pipeline of IPOs,” said Rusmik Oza, Head of Fundamental Research at Kotak Securities.

Data showed only 11 mainboard IPOs have hit the primary market ever since Dinesh Engineers’ issue was shelved in October 2018. Many issues, approved by Sebi, could not be launched due to adverse market conditions, and their approvals lapsed.

The one-year return for Sensex, which fell half-a-per cent last week, has climbed to 7 per cent now, thanks the sharp runup in the index since Friday, September 20. What is more encouraging was the recovery of the smallcap index, which has climbed in all but three sessions this month.

“The clues we have started receiving from the secondary market are quite encouraging. Sentiment has improved a lot. There are hopes that the corporate tax cut bonanza will eventually yield good dividends. While it would take some time, people will now have an appetite for IPOs,” said Dharmesh Kant, Head of Retail Research at IndiaNivesh Securities.

Astha Jain, Senior Research Analyst, Hem Securities, said she expects a flurry of IPOs in the coming months. “I expect IPOs in both SME and mainboard segments. The lower corporate tax rate of 15 per cent for new manufacturing companies incorporated after October 1 is, in fact, quite a positive news for the primary market in the SME segment.”

Anmol Industries could not come up with its issue even after a year of Sebi approval. Century Metal Recycling, Aakash Educational Services and Ami Organics are three other firms, which have failed to come up with IPOs after almost a year of approval, data with PRIME Database suggested.

Many PE-back companies such as ASK Investment Managers, Mrs Bector’s Food Specialties, Dodla Dairy and Sansera Engineering that have Sebi approvals will be in focus.

Jain of Hem Securities says PE-backed issues should see strong investor response, if one were to go by some of the recent IPOs such as IndiaMart InterMesh and Affle India, which did reasonably well despite having demanding valuations.

Affle India IPO was subscribed 81 times while that of IndiaMart saw 36.21-time subscription.

“It is a function of demand and supply. The name of the PE, the background and the pedigree do matter. Metropolis and Polycab India were two other PE-backed issues which did well,” Oza said.

Bajaj Energy, Angel Broking, Annai Infra Developers, Shriram Properties and Emami Cement are some of the PE-backed IPOs that received Sebi nod recently.

Kant said one must see whether a PE fund is part-exiting a company or new shares are being issued for future investment. “If it is the latter case, then the IPO may command higher premium.”

He said what the government needed to do has been done. In spite of that, if the economy did not pick up, it may go around.

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26 Sep, 2019
>> Total contribution to the list - 11.2%>> Richest Person - Gautam Adani>> Wealth - Rs 94,500 crore(SOURCE: Hurun Research Institute; IIFL Wealth Hurun India Risch List 2019For more details visit www.hurunindia.net )
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