Top 9 IPOs in India To Watchout For in 2020
Author： Sanchita Sairang-Kshatriya
Initial Public Offering (IPO):
An Initial Public Offering (IPO) introduces the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance enables a company to increase capital from public investors.
The change from a private to a public organization can be a great time for private investors to completely receive gains from their investment as it typically holds share incentives for current private investors.
The year 2019 was a tangled case for investors - while those primarily invested in large-cap stocks earned money, others who had deposited their confidence in mid and small caps had a poor run.
Yet, the market for IPO proved to be profitable again. As a matter of fact, IPOs made more money for investors than even large-cap and mid-cap stocks.
2020 has an impressive list with top IPOs like SBI Cards, LIC, Bajaj Energy among others lined up Approximately 40-50 companies are expected to go public this year, hoping to raise money to the count of Rs 40000-50000 Crores. So let’s get a look at who these companies are and what’s in the market for IPO investors in 2020.
The much-awaited IPO of SBI Cards will begin for subscription on 2nd March 2020. Assuming to build around 9000 Cr, the price range of every share has been set at Rs 750-755, with each group size set at 19 shares.
Local clients are permitted to place an order for a maximum of 13 slots only which caps the amount at Rs 186,485.
What most people think about SBI Cards and payment services is that their main business is only narrowed to credit cards. Yet, a huge part of the company’s income is made by the amounts’ services side of the business as well.
Some merchants sell their products and services but do not get the money from customers directly. Alternatively, they accept payment services to help this market. Hence SBI cards give their payment facility to such merchants which becomes an income stream for SBI.
As the company goes public, the amount so raised will be used towards instituting SBI as a strong payment gateway as well as further expand its credit card business. By ensuring increased potential SBI cards and services becomes an attractive opportunity for investors.
The IPO made a fresh issue where shares worth Rs 500 crore. Aside from this, a major part of the shares worth Rs 13 crore was sold as an Offer for sale by the parent firm - State Bank of India and CA Rover Holdings, an affiliate of private equity firm Carlyle Group.
The SBI financial has showcased a strong performance, with a 35% rise in wealth in the 2018-2019 period. Profits also improved by more than 36% throughout this time. The SBI Card IPO thus received a strong response from the investors and raised Rs 10,340 crore through the issue.
Life Insurance Corporation ( LIC)
The decision to privatize LIC, which was declared in the Union Budget 2020 has created quite a ruckus in the investor community.
The Modi government has stated that it will sell 10% of its share in the organization through an initial public offering (IPO).
According to experts, the government is expected to fetch a valuation of around Rs 8-10 lakh crore, making it the largest IPO.
As a brand, LIC is no stranger to us. Until 2000, if you were required to buy any life insurance, LIC was the only choice, ergo it has a huge monopoly over the insurance market.
Till 2000, all LIC application methods were also done offline. Therefore if you ever had to buy a policy, the only way to do so was through an LIC agent.
Even LIC’s agent network was far-reaching throughout PAN India. This number was around 10 Lakh in 2000. Yet, after 2000, numerous private players began to enter the insurance area and challenged LIC’s monopoly.
They began selling various kinds of insurance policies supported by banking networks. Even though LIC had a golden chance to sell their insurance policies through public sector banks and hold its clout, yet, the company didn’t pay much attention to the changing tides in the industry.
However, LIC is still a market leader in the insurance space and has made numerous investments in other companies as well. Some of these companies include IDBI Bank, ITC, Yes Bank, among others.
This indicates, if these companies perform well, LIC will earn good profits as the majority of the company’s profits come from these investments. Therefore, if you want to invest in LIC IPO, it is also necessary to pay attention to the companies LIC has invested in, and their future prospects.
Besides all this, there is another reason why LIC’s IPO is important. If we discuss the budget this year, the government declared its income targets for the year as 2.1 Lakh Crores. Out of this 70,000Cr amount, that is 1/3rd of the amount will be raised by the IPO. The dates for the LIC IPO subscription are still not announced.
Bajaj Energy is one of the largest private-sector thermal generation companies in India. Not only is Bajaj Energy a leader in power generation, but it also does the work of investment in other organizations.
Bajaj Energy has arranged for its Red Herring Papers, that is the starting process to register for an IPO. The issue makes up fresh issuance of shares worth Rs 5,150 crore and an offer-for-sale of Rs 300 crore by its parent company Bajaj Power.
Bajaj Energy intends to use the earnings from the share sale to buy 6.99 crore equity shares of Lalitpur Power Generation Company from Bajaj Power and Bajaj Hindustan Sugar for Rs 4,972 crore and the remaining amount will be utilized for general expenses.
Edelweiss Financial Services, IIFL Holdings, and SBI Caps are the lead managers to the issue, while IDBI Capital Markets is co-book running lead managers to the issue.
Computer Age Management Services (CAMS)
The Computer Age Management Services (CAMS) IPO size is supposed to be around INR 1500 – 1600 crores which would value the company at Rs 6000 crores. The entire IPO is an offer for sale (OFS) of 1.22 crore equity shares by existing investors in CAMS that include Great Terrain Investment Ltd (an affiliate of Warburg Pincus), NSE Investments, HDFC, ACSYS Investments, and HDB Employees Welfare Trust.
The Chennai based organization with more than 30 years of services, is the largest Registrar and Transfer Agent (RTA) for the Mutual Fund industry. It offers integrated services for the receipt, verification of financial and non-financial transactions for the BFSI sector, extensively to the MF industry.
The lead managers of CAMS IPO are HDFC Bank, ICICI Securities, Kotak Mahindra Capital and Nomura Financial Advisory and Securities Services (India)
UTI Asset Management Company
UTI Mutual Fund was the first mutual fund to be operational in India. The public issue includes an offer for sale by shareholders including State Bank of India, Bank of Baroda, LIC, Punjab National Bank and T Rowe Price.
According to the media reports, the size of the IPO is pegged to be around INR 3800 – 4800 crores, which would value the asset manager at around Rs 12,000-15,000 crore SBI, Bank of Baroda and LIC will sell 1.04 crore shares each, while PNB and T Rowe Price International will offload 38.03 lakh shares.
The equity shares will be listed on BSE and NSE.
After Reliance Nippon Life Asset Management and HDFC Asset Management, UTI AMC would be the third entity from the mutual funds' industry to go on the bourses. According to Crisil, UTI AMC is the seventh-largest asset management company in India in terms of mutual QAAUM (quarterly average assets under management) as of September 2019.
The fund house has appointed Axis Capital, Citigroup Global Markets India, DSP Merrill Lynch, ICICI Securities, JM Financial, Kotak Mahindra Capital and SBI Capital Markets as the Book Running Lead Managers to the offer.
Burger King India
Fast-food giant Burger King India is one of the fastest-growing international QSR (Quick Service Restaurant) chains in India and has plans to list on the bourses this year. With this IPO, private equity Everstone through its vehicle QSR Asia Pte Ltd., which owns a majority stake in the company is likely to make a partial exit.
As per reports from VCCircle, the proposed IPO shall involve Everstone selling a quarter of its shares while the burger chain issues fresh shares worth Rs 400 crore. The total IPO size is estimated at Rs 1,000 crore ($141 million).
The initial share-sale of Burger King IPO is being managed by CLSA India Pvt Ltd, Edelweiss Financial Services, JM Financial, and Kotak Mahindra Capital Company.
Burger King India’s rivals Westlife Development - which runs master franchisee for McDonald’s in western and South India and Jubilant FoodWorks Ltd - the franchise for Domino’s, went public in 2009 and 2010 respectively.
Home First Finance Company
The firm is engaged in mortgage financing, particularly in the affordable housing segment. The IPO size is supposed to be in the range of Rs 1500 crores.
The IPO consists of a fresh issue of Rs 400 crore and an offer for sale of Rs 1,100 crore by promoters and investors - True North Fund V LLP, Aether (Mauritius), Bessemer India Capital Holdings II, P S Jayakumar, Manoj Vishwanathan, and Bhaskar Chaudhry.
True North Capital, a homegrown private equity firm, owns a majority stake in HFFC (80 percent) while Bessemer Venture Partners (BVP) holds another 10 percent. The management of HFFC holds the remaining shares.
Axis Capital, Credit Suisse Securities, ICICI Securities, and Kotak Mahindra Capital are appointed as the book running lead managers (BRLMs) for the share sale.
HFFC was founded in 2010 by P S Jayakumar, MD, and CEO of Bank of Baroda and Jerry Rao former Mphasis chairman.
Equitas Small Finance Bank
Equitas Small Finance Bank, through Equitas Housing Finance, limited has been engaged in housing finance vehicle financing and Micro and small enterprise financing ( MSME ).
According to the document filed with market regulator SEBI, the Equitas SFB IPO includes a fresh issue of shares worth Rs 550 crore and an offer-for-sale (OFS) of 8 crore equity shares by the promoter, Equitas Holdings Limited (EHL).
The bank suggests utilizing the net proceeds from the offer towards strengthening its Tier I capital base to meet the future capital requirements
Equitas SFB began as a microfinance company in 2007 and was given a small bank license in 2015. It was established as a bank in 2016 after merging the housing and microfinance sectors.
The lead manager to the issue is Edelweiss Financial Services Limited, IIFL Securities Limited and JM Financial.
The hospitality company which includes a chain of luxury, boutique hotels under ‘The Park’ brand is part of the Apeejay Surrendra group. It has various properties in major cities across India.
The size of the IPO will be Rs 1000 crores, which shall have a fresh issue of around Rs 400 crores and an Offer of Sale of Rs 600 crores, being given by Apeejay’s group companies.
The amount raised shall be utilized towards repaying existing debt and for other corporate services.
Investment banks Axis Capital, ICICI Securities, and JM Financial are appointed to manage the share sale.
National Stock Exchange ( NSE )
The IPO would include an offer for sale by many stockholders, including the State Bank of India, which has a 5.19 percent stake in the exchange raising about Rs 10,000 crore. NSE had earlier tried to raise funds through IPO in 2016 as well.
NSE has revived its listing plans which were put on a backburner following a probe by Sebi against the exchange and some of its top brass. It was alleged that the bourse misused its co-location facility and gave undue access to certain members for a fee.
The exchange could seek a total valuation of Rs 44,000-46,000 crore in the share sale.
Some other IPOs slated for this year are - SAMHI Hotels, Mazagon Dock Shipbuilders, Integrated Renewable Energy Development Agency (IREDA), Emami Cement, Easytrip Planners.
2020 looks to be an interesting year for stock market investors. The current success of some IPOs points to a positive start in 2020. Although paying attention while deciding the companies’ records, finances, area of business and management is necessary when investing in an IPO.