Back in the groove: IPO market sizzles in 2015

At a time when secondary markets are plying through choppy waters, traders are relying heavily on the primary market to safeguard their investments as both Initial Public Offering (IPO) and follow-on equity offerings attract strong investor interest.

Confidence is back in the IPO market as there is huge demand for diverse set of companies with completely new business models to hedge volatility and weak foreign fund flows prevailing in the equity market in the face of mounting domestic and global uncertainty.

The health care sector is looking very healthy in the department of initial public offerings, with the latest set of public offering by two entities, Alkem Laboratories and Dr Lal PathLabs, witnessing strong participation both from foreign and domestic investors, driven by investors’ increasing appetite to invest in unique companies that are fairly valued as secondary market valuations are not that cheap.

Alkem Laboratories received orders worth 44 times the number of available shares for its Rs 1,350 crore initial public offering, according to exchange data. Qualified institutional investors (QIBs) were the most active bidders, having placed orders worth about 57.2 times the number of shares slotted.

Meanwhile, Dr Lal PathLabs, a leading diagnostics chain operator, received bid for 2,14,51,060 shares against the total issue size of 81,20,000 shares for its Rs 630 crore IPO on the second day of the issue. The quota reserved for QIBs was over-subscribed 6.13 times, non-institutional investors received 57 per cent subscription, while retail category was subscribed 1.56 times, exchange data showed.

The IPO market will sign-off the year 2015, registering its best performance since 2010, driven by the success of marquee offerings of InterGlobe Aviation, Coffee Day Enterprises, Alkem Laboratories, Dr Lal PathLabs, Sadbhav Infra Projects, Prabhat Dairy and S H Kelkar.

With another power pack Narayana Hrudayalaya’s Rs 613-crore IPO lined up in the second week of December, the IPO companies are expected to raise Rs 14,000 crore this calendar year, the highest since 2010 when 64 companies raised about Rs 37,500 crore.

All in All, 2015 marked a reversal of trend when primary markets outshone secondary markets that have been plagued by bearish sentiments.