INDIAN IPOs GIVE BETTER RETURNS THAN THAT OF AMERICANS
Amid India’s bull market celebration, it’s the newcomers that are having the biggest parties.
The 47 initial public offers (IPOs) priced this year have returned an average of 41 per cent, more than four times the climb in the benchmark S&P BSE Sensex, data compiled by Bloomberg show. The gain is double the 19 per cent mean for US deals, and ahead of the nine per cent offered by first-time sales in Europe, the figures show.
Micro finance providers, a citygas supplier, a staffing firm and a diagnostics chain are among companies that have raised $1.5 billion since January 1, more than twice the amount from a year earlier. That's happened as a buoyant stock market prompted private equity investors including Sequoia Capital to exit from some of these investments. New sales could reach a record in the year to March, the regulator forecasts, as investors chase companies riding the services boom in the world’s fastestgrowing major economy.
“India has changed and a changing country needs new services and there’s demand for them,” Sadanand Shetty, a senior fund manager at Taurus Asset Management Co, which oversees $476 million, said by phone from Mumbai. “Most of the IPOs are from new high-growth sectors. Their valuations are not cheap but investors are paying a premium.”
Companies are tapping a growing pool of capital as institutional investors pour money into stocks, driven by the 25 per cent gain in the Sensex since Prime Minister Narendra Modi took office in May 2014. Equity funds took in a net ~74,000 crore ($11 billion) in the year ended March, up four per cent from a year earlier. Investor accounts reached 48.9 million in June, up from 47.6 million in March, data from an industry body show. PE exits India’s isn’t the only country seeing a pick up in first-time sales. With US equities at records, investors are betting on IPOs again after a slow start to the year. Japan's Line Corp raised a little Issue size (~ cr)
400.00 479.21
411.00 1039.64 2176.68 423.68 750.54 882.50 450.00 1236.38 410.19 451.25 649.64 more than $1 billion in 2016's biggest technology IPO this month. In China, the waiting list for new issue approvals exceeds 800, according to the China Securities Regulatory Commission's website. Gain (%) On Day IPO till one date*
58.68 38.59
31.51 23.49 22.95 20.23 15.26 10.29 3.17 -1.74 -4.70 -20.73 -21.58 86.48 25.71 31.51 21.65 77.45 23.96 43.49 146.76 62.45 -3.42 -29.73 -16.81 -6.88
The difference this time in India is that the first six months have seen private equity investors sell stakes worth ~3,000 crore through IPOs. That's higher than the ~2,340 of positions they cashed out of in 2015, according to Delhibased Prime Database. The outperformance from first-time sales is the most since calendar 2014, when the S&P BSE IPO Index surged 82 per cent after Modi's election win, beating the 30 per cent annual gain in the Sensex. Strong demand Quess Corp, a technology staffing firm, began trading July 12 at a 56 per cent premium. Shares in India’s biggest IPO of the year were valued at 45 times fiscal 2016 earnings. Yet, the portion kept for wealthy individuals was oversubscribed 397 times, while large investors bid for 61 times the quantity.
Mahanagar Gas, a supplier to homes and cabs in Mumbai, generated a 28 per cent pop for investors on its July 1 debut. Equitas Holdings, in which Franklin Templeton India has a 8.5 per cent stake, has surged 78 per cent since its April debut. The shares trade at 32 times forward earnings. To be sure, large subscriptions have not always led to a big-bang listing. Under water L&T Infotech, a unit of the largest engineering company, saw its shares drop below offer price on their July 21 debut. Precision Camshafts, Quick Heal Technologies and HealthCare Global Enterprises are all trading below their sale prices.
Some investors such as Aberdeen Asset Management Plc prefer companies with a longer financial and trading history over new issues.
“There are enough opportunities in the listed universe where we can sieve for companies with a record of operating through cycles and fair treatment of minority shareholders,” said Kristy Fong, a Singapore-based assistant investment manager at Aberdeen Asset.
That said, companies including ICICI Prudential Life Insurance Co are preparing to go public. Eighteen IPOs seeking ~6,100 crore have been approved by the regulator, according to Prime.