High-profile floats to test market mettle

The country's IPO market faces a crucial test as the offering from InterGlobe Aviation opens for subscription on Tuesday and Coffee Day Enterprises gets listed subsequently.

By Our Special Correspondent in Mumbai
  • Published 26.10.15
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Mumbai, Oct. 25: The country's IPO market faces a crucial test as the offering from InterGlobe Aviation opens for subscription on Tuesday and Coffee Day Enterprises gets listed subsequently.

Analysts maintain that the performance of these two offers after listing will hold the key for other issuers who are set to hit the markets.

SH Kelkar & Company, a fragrance and flavour maker, will tap the markets to raise Rs 500 crore on October 29.

"The success of these three share sales post listing will determine the fate of those planning to hit the market in the next couple of months. If these offerings do well, one can expect pricing of the subsequent issues to be aggressive,'' said Arun Kejriwal, director of Kejriwal Research & Investment Services.

According to PRIME Database, the IPO pipeline looks promising.

At present, 19 companies are planning to raise Rs 11,545 crore have Sebi's approval. Another 17 intending to raise Rs 6,795 crore are awaiting the green signal from the regulator.

However, many investors continue to remain value conscious. This was evident in the Coffee Day Enterprises offer where the portions reserved for retail and non-institutional investors were not fully subscribed.

Analysts said some of these investors were also not enthused by the holding company structure and the valuation factor. Moreover, a tepid grey market for the share kept high net worth individuals (HNIs) at bay.

"Further, the margin for loan against application was in double digits, which made the funding cost higher making the issue unattractive to the leveraged investor,'' Kejriwal said.

While the company fixed the upper end of the price band as the issue price, market circles are divided over how it would fare after listing.

"The share is unlikely to witness a significant appreciation upon listing,'' an analyst said.