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IPO rush unlikely to hurt surging secondary market

Guest Author | 22 Sep, 2017  | Follow Author | Add to my Favourites 
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The IPO market is becoming strong with more than 18 companies this year so far, which have come up with their IPO launch date. These companies are able to raise about Rs. 25,900 Cr of funds. Some more companies are hoping for their IPO approval and hence are in pipeline which will take this figure even higher.

The top five companies who have got the Securities Exchange Board of India approval for IPO or FPO are Continental warehousing Corp with their IPO valued at whopping Rs 1,000 Cr, Genesis Colors and Nakshatra world each with Rs 650 Cr amount, Godrej Agrovet with Rs 600 Cr IPO and Shalby with Rs. 580 Cr estimated issue amount. The companies that are in pipeline with an upcoming IPO are General Insurance Corp of India, HDFC standard Life insurance, National Stock exchange of India, New India assurance co, and Astor DM Healthcare.

But the market experts are not too bothered about the diverting attention from the secondary market. Actually, this rushing secondary market is inspiring several organizations to hit the equity market for capital because now they hope an improved valuation. Some of the analysts also believe that this IPO rush will actually bring more money into the market due to the renewed interest. Since more flows will come, it will not affect the markets adversely.

Recently, the ICICI Lombard General Insurance Co. Ltd’s IPO to raise to Rs 5,700 Cr was opened and SBI Life Insurance Co. Ltd’s Rs 8,700 Cr IPO is expected to open within a day.  It is believed that with these surging IPO’s, many people will put fresh allocations into the country. The strategic investors such as sovereign wealth funds (SWF) believe that these issues are an opportunity to deploy relevant money.

When the fund-raising from such IPOs have already become Rs. 26,000 crore, an added Rs. 46,470 Cr more IPOs are on the way with General Insurance Corp. of India, National Stock Exchange of India Ltd and HDFC Standard Life Insurance Co. Ltd being the biggest issuances worth Rs.10,000 crore each, the share market news confirms.

As per the Credit Suisse, the IPO issuances in the financial year 2018 is expected to be 35% more than the year 2008, when a peak was observed. As per the data shared by the National Securities Depository Ltd, FII’s or the Foreign institutional investors have invested an amount of $69 million or INR441Cr. in Indian shares in this fiscal year till now.

Also, according to the BSE data, the domestic institutional investors or DIIs have invested Rs. 46,185 Crin the asset classincluding the primary market investment offerings too. This increase in DIIs inflows is due to the increase in investment from the retail investors in equities through the mutual fund because the interest rates have come down. This has made traditional investment destinations like fixed deposits less profitable.

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