IPO investors open to invest in sectors like dairy firms, micro-finance and healthcare

MUMBAI: Gone are the days when traditional industries such as construction and engineering used to dominate the primary market to raise funds. These days, sectors like dairy firms, micro-finance, healthcare and staffing services are crowding the initial public offering (IPO) space. Investment bankers say investors are open to investing in these companies because of their stronger growth prospects.

“I see the trend (of non-traditional and service sector IPOs) continuing because many of these sectors have high potential for growth. That is why investors have shown a preference for these kinds of stories,” said S Ramesh, MD, Kotak Investment Banking.

Of the 11 listings in the current year, majority of the companies have few or no comparable peers in the listed space. These firms collectively raised Rs 7,343.07 crore. Some of these include Narayana Hrudayalaya, Teamlease Services, Quick Heal Technologies, Equitas Holdings, Thyrocare Technologies, Ujjivan Financial and Parag Milk. Their issues were oversubscribed 1-52 times and most of are trading above their issue prices as well, up 9 to 51%.
Vinay Menon, MD, JP Morgan India, said the success of these IPOs can be attributed to the fact that many of them cater to the broader Indian consumption theme.

“Investors are looking at names which are playing the India growth theme as well as banks because they are a direct correlation to the GDP and growth of the country,” Menon said.

Regulatory compliance to reduce foreign ownership, exits by private equity investors and value unlocking by promoters have resulted in the emergence of such IPOs in recent times. “Newer sectors coming with IPOs is good for the market as it lends more depth to the market as well as attract a larger pool of investors,” said Nipun Goel, head of investment banking at IIFL. The forthcoming non-traditional and services IPOs include Quess Corp, Advanced Enzyme and New Delhi Center for Sight. Future IPO trends will also include life insurance and stock exchanges.

Leading private insurers ICICI Prudential and HDFC Standard Life are reportedly looking to raise over $1 billion via IPO this financial year.

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