Report9 : In the next couple of months, investors may soon get to own shares of well-known brands with some of the big names ready to strike the primary market. Cafe Coffee Day, operated by Coffee Day Enterprises, will be the first among them to initiate with an initial public offering (IPO). The company that is presumed to launch its issue next week (October 14-16), schemes to raise up to Rs 1,150 crore, said bankers to the issue. Cafe Coffee Day Enterprises is supposed to have fixed the price band at Rs 316-328 for its initial share sale.
Next is InterGlobe Aviation, the owner of IndiGo, is supposed to raise about Rs 2,500 crore through an IPO in the fourth week of this month.
Coffee Day, InterGlobe and Infibeam are among the 19 companies which have received regulatory approval to list on local bourses. These firms plan to raise about Rs 11,545 crore, according to Prime Database.
Both the companies have thought to take the dive into the primary market despite investor sentiment remaining fragile. While foreign institutional investors (FIIs) have converted buyers of shares in the last four trading sessions worth Rs 1,600 crore, they have sold to the tune of almost Rs 23,000 crore in August and September amid aversion to risky assets such as emerging markets sparked by the downturn in China. Bankers are hoping that Coffee Day’s upcoming IPO — the largest in 2015 so far — will be able to pull FIIs’ interest.
Dharmesh Mehta MD & CEO of Axis Capital said, “Some of the IPOs this year are unique as these are well-known brands in India and investors will now get to own them.” Mr. Mehta also added, “There is limited scope to invest in good and large brands in India unlike globally. There is enough money domestic and globally for such deals if valued correctly.”
InterGlobe Aviation could also see aggressive demand from investors, said bankers.
Investment bankers say that India is one of the favourite destinations to invest in is because of its domestic consumption theme.
Mehta said, “Global investors are looking for such opportunities as they have seen small brands become giant companies in their countries like Apple, Starbucks, Zara etc. These may be small deals but if the issue is priced well there will be good demand from investors.” Infibeam, the first pure-play e-commerce company from India looking to go public, is likely to strike the market in December this year with its Rs 450-crore offer.
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In 2015, 15 companies have so far raised about Rs 6,346 crore through IPOs. To name a few are Manpasand Beverages, PNC Infratech and VRL Logistics, among others, and they have yielded around 48%,35% and 34% returns, respectively. Only five companies are still in the red zone category since listing.
The primary market has shown reluctance in the last four years. In the time span from 2011 to 2014, 56 companies have raised over Rs 15,000 crore.
36 companies have so far filed their draft red herring prospectus with Sebi. Previous month, Teamlease filed its draft red herring prospectus with market regulator Sebi for its Rs 200-crore issue. It would be the first HR (human resource) company to be listed in India.
L&T Infotech, the IT unit of engineering and construction giant L&T, also joins the list of these top firms to use the primary market over the next few months. L&T is scheming to sell 1.75 crore shares of the software firm in the issue which is almost 11% of L&T Infotech’s equity. As per a banker to the issue, L&T aims to raise close to Rs 2,000 crore from the IPO.
Arvind Vashistha, head of equity capital market origination, Citi India said, “This year, and going forward, we expect to see some interesting IPOs coming to the market. These are businesses that are well run with high return ratios and robust growth profiles.”Previously, companies captured primary markets to raise funds to meet their capital expenditure needs. In recent times the trend has changed where institutional investors like PE funds are looking at exiting their investments through IPOs.
Vashishtha said,”Some of the existing investors in these businesses put their stock out in the market to exit while others have to meet regulatory requirements.”