Indian investors seem to be in frenzy, lapping up IPOs with valuations touching the sky. Prataap Snacks IPO priced at an inexplicable 202 times earnings got oversubscribed by 47 times Yesterday. D-Mart IPO, which was priced at relatively higher as compared to peers, saw listing gains of more than a 100%. The Ashburton Investments which manages a staggering $10 billion globally and is also a prominent investor in Infosys said that it was the valuations that prohibited the company from subscribing. The chief investment officer at Ashburton Investments, Jonathan Schiessl told ET Now last month, “We did a lot of work on that and decided to stay away. The valuation just kept us away.” He added that he missed the bus on the IPO and sometimes that you just need to bite the bullet.
With frenzied buying, the IPO market is rife. The companies apart from Avenue Supermarts, such as Shankara Building Products, BSE Ltd, Apex Frozen Foods, etc saw blockbuster listings. Yesterday, Harshil Sethia of BP Wealth told FE Online that some of the IPO companies are really overvalued and that the bubble has to burst sometime as for the companies, it appears to be the best time to roll out its IPO.
Liquidity in the markets has caused many of the companies to come out with their primary issues. In the nine months so far in 2017, a staggering Rs 38,000 crore have been raised in the primary markets. According to Reuters data, 2017 is expected to be a record-setting year for IPOs, with fund raising predicted to exceed 2010’s high of $8.5 billion. According to S Ramesh Managing Director and CEO of Kotak Investment Banking, India Inc is set to raise Rs 1 lakh crore in the next 12 months.
Yesterday, Harshil Sethia told FE Online that there is a lot of liquidity in the markets, as retail investors are pumping in amounts which is even offsetting the huge FII selloffs. Every company coming out with an IPO is getting a very good valuation. The financial analyst says, 40-50 IPOs are lined up in the IPO pipeline for 2017.
Analysts also said that companies with strong fundamentals deserve good valuations.
Siddharth Purohit, an analyst with Angel Broking said, “Companies with strong business model and healthy financials would continue to get good response in the primary market, and hence the IPO market could remain active during the year”.