The IPO Party is On

The week saw IPOs collect Rs. 3.67 Lakh Crores. This clearly signals a euphoric response to IPOs from Indian investors. The investor appetite for equity seems unrelenting even as other asset classes take a back seat. This would mean that companies waiting on the sidelines to IPO will now hasten their issues.

We will definitely see more OFS (Offer For Sale) issuances hitting the markets in the coming weeks. Tired Venture Capitalists will be more than happy to utilise the current exuberance in the IPO market to exit their stocks. But are the investors doing the right thing by being so positive on IPOs? Or are they simply playing the IPO rich like just another lottery?

What investors really like now about IPOs, is their quick turnaround time. The IPO cycle has been shrunk to 7 days and investors are keen to utilise monies idling in their bank accounts to try for a quick trade in new issues. The ASBA mechanism makes it very simple to merely block your money for an IPO while retaining it in your own bank account. Based on the actual allotment to you, only the exact sum will be taken from your account after the issue allotment gets finalised. This completely eliminates the risks of refunds and simplifies the investor experience in new issues.

While IPOs have been ruling the roost, private placements and QIPs have also had a strong appetite. Companies are in a hurry to raise whatever monies they can from investors utilising the current phase of elevated valuations. This would help them implement CAPEX plans, expand their infrastructure, enter new markets, and launch new products. Some companies also want to raise equity and repay debt. Clearly, the ease of raising capital and the elevated nature of valuations are causing this thinking to spread rapidly among promoters of companies.

Overall, this seems like a great phase for issuers of equities and investment bankers. It remains to be seen how beneficial this phase will turn out for retail investors. For now, nobody is bothered too much as everyone simply wants to party on.

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