Volatility in the secondary market has yet to spill over into the primary market, with new listings and initial offers creating a strong investor appetite. Engineering firm MTAR Technologies’ IPO on Friday was underwritten more than 200 times, attracting offers worth around Rs 84,000 crore.
Meanwhile, shares of agrochemical firm Heranba Industries rose about 50 percent when it started. Additionally, online travel booking company Easy Trip Planners saw encouraging response from institutional investors in the anchor category ahead of its listing on Monday. This comes despite the index’s sharp correction for a second session amid a liquidation in the US bond market.
Experts said sentiment towards the initial offers remains strong, supported by the success of recent announcements. The dozen companies that went public after their IPO recorded an average gain of 49 percent on listing day. IPO contenders made money on all but two trades, which saw modest declines on listing day.
Half a dozen more are expected to launch their IPOs soon. Experts believe that the correction triggered by the turmoil in the bond market will not spoil the party.
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“There is a bit of volatility in the secondary market. However, liquidity is plentiful and the general sentiment is optimistic. We will continue to see activity in the primary market until this continues, ”said Pranav Haldea, MD, Prime Database.
“Unless there is sustained volatility in the secondary market, primary markets may not be affected. There is always a mismatch between the secondary and primary markets in terms of volatility. What bond yields tell us is that risk appetite must be lower than what we have now. In the event of a currency shortage, IPO valuations could be affected, ”added Skanda Jayaraman, head of investment banking at Spark Capital.
Institutional and individual investors seem to have taken a liking to IPOs.
The IPO of MTAR Technologies saw 165x underwriting in the institutional investor segment, the HNI (High Networth Individual) portion of the issue was subscribed 650x and the retail quota was subscribed almost 30x. The precision engineering company caters to the defense and clean energy sectors.
The Rs 596 crore IPO included a further fundraising of Rs 123 crore and a secondary stock sale valued at Rs 473 crore.
At the upper end of the IPO price range of Rs 574-575 per share, MTAR will have a market cap of Rs 1,770 crore after issuance. Most brokerages had asked their clients to subscribe to the IPO, citing high growth potential and profit margins.
Heranba’s IPO, which predated MTAR’s, was underwritten 83x. The shares peaked at Rs 945 on Friday before settling at Rs 826 – a 32% gain from the issue price of Rs 627.