2015 turned out to be a year of wonders for the Indian stock markets. While the wider secondary markets was greatly affected by global events, most notably fears about China’s slowing consumption, the IPO market followed its own rally. Investors made fantastic returns in some of the most aggressively priced IPOs in recent years. This naturally leads us to what the upcoming IPOs in 2016 have in store for investors. IPO Central takes a look at all the companies expected to hit the IPOs market this year.
As of 12 January 2016, as many as 26 companies have SEBI approvals to launch IPOs in India. This includes some big names like AGS Transact, L&T Infotech and HealthCare Global, as well as some popular names like Numero Uno Clothing, Infibeam, Matrimony, Quick Heal, and VLCC.
Approx. issue size (INR cr)
ACB (India) Limited
Uniparts India Limited
SMC Global Securities Limited
Precision Camshafts Ltd
SSIPL Retails Limited
AGS Transact Technologies Limited
Dilip Buildcon Limited
Amar Ujala Publications Limited
Catholic Syrian Bank Limited
Numero Uno Clothing Limited
Nuziveedu Seeds Limited
Matrix Cellular (International) Services Limited
Infibeam Incorporation Limited
Health Care Global Enterprises Ltd
Paranjape Schemes (Construction) Limited
Bharat Wire Ropes Limited
SSIPL Retail Limited
Team Lease Services Limited
Quick Heal Technologies Limited
Sandhar Technologies Limited
VLCC Health Care Limited
Parag Milk Foods Limited
Larsen & Toubro Infotech Limited
GNA Axles Limited
Equitas Holdings Limited
Without doubt, this is a long and impressive list and will get bigger as we progress through the year. This is generally positive for the markets but it is not that investors are going to make money with every IPO. As 2015 taught us, the market follows its own rules and grey market premiums can evaporate very quickly. Nevertheless, there are some of these IPOs which investors should be watching closely.
AGS Transact Technologies: At INR1,350 crore, it will be one of the biggest IPOs to hit the markets this year. But that’s not what makes it interesting for investors. The Mumbai-based payment solutions provider is a leader in its domain which is installation, maintenance and cash management at ATMs. It offers its services at more than 41,000 ATMs across the country (if you are reading this, you may start noticing the AGS logo on ATMs now). The company’s performance has been impressive enough to attract investment from private equity firms TPG Capital and Actis. Both investors will be cutting their stake in AGS through the IPO but we like the fact that the company will also get INR400 crore to reduce its debt levels.
Read Also: AGS Transact Technologies secures SEBI clearance for INR1,350 crore IPO
Dilip Buildcon Limited: Infrastructure was one of the hot themes last year and Dilip Buildcon plans to extend it to this year with its IPO. No surprises here, this upcoming IPO has the twin objectives of debt reduction and allowing exit to existing investors. Its profitability has been hampered in recent years but it is still among the better managed companies in the space. It may be slightly long term in nature but the secondary market has been rewarding toll-road players and Dilip Buildcon has a good presence here. In fact, the infrastructure development business on BOT basis has become a bigger revenue contributor than the construction business.
Infibeam Incorporation Limited: If everything goes as planned, it will be India’s first e-commerce company to list on the stock exchanges (Info Edge is there but we don’t like bundled product conglomerates). Without doubt, it has been outsmarted by the likes of Flipkart and Snapdeal but one can still expect it to command a premium as the only listed pure-play e-commerce player. There is no offer for sale (OFS) planned in the IPO which we like but there are too many Mehta and Desai in the list of top shareholders in the company (read no private equity investments) which does not inspire confidence. Interesting, but not for the faint hearted.
Financial performance is not a yardstick for e-commerce players but if you want to know how Infibeam is doing, read it here E-commerce player Infibeam files papers for INR450 crore IPO
Health Care Global Enterprises: We were proved wrong by Narayana Hrudayalaya which demonstrated that investors have great appetite to pay premium for a non-so-easily scalable business with net profit margin of less than 3%. If that is any indication, Health Care Global (HCG) has a fighting chance. There is no JP Morgan, CDC Group, or Kiran Mazumdar Shaw like Narayana Hrudayalaya, but there is Azim Premji’s PremjiInvest among investors. The company has not reported profits in the last three years but may do so by the time this upcoming IPO hits the market. HCG appears to be in a hurry among the new IPOs and the offer is likely to open for subscription in January.
Read Also: Health Care Global, TeamLease IPOs lined up for January
Team Lease Services Limited: Apart from
Health Care Global, TeamLease Services is the other company expected to tap the primary market this month. Temporary staff! We may not think of temporary staff in the most glorious terms but TeamLease has demonstrated there is serious money to be made here. There is a great management team, led by Manish Sabharwal, at the helm that has tripled revenues in four years. From a loss of INR40.5 crores in FY2011 to a profit of INR30.7 crores in FY2015, this is great execution in an environment where there is no luxury to err. We rest our case but if you want to read more, here is something.
Matrimony.com Limited: For investors looking to play the e-commerce theme without taking too much risk is the matchmaking site Matrimony.com. This Chennai-based internet company plans to raise INR350 crore through fresh shares while existing investors plan to sell 16.6 lakh shares through an offer for sale (OFS). Unlike selling products online, selling matchmaking services is profitable. The company has swung to losses though in recent years as a result of exceptional costs. Bessemer India plans to exit through the IPO but Mayfield and CMDB– two other private equity investors – will not be participating in the sale.
Quick Heal Technologies Limited: A domestic success story in a market inundated with global and pirated products. A strong and well-known brand name is a huge positive and so is the backing of Sequoia Capital. Highly competitive market has left the company struggling with margins in recent years although revenue growth is still pretty much there.
VLCC Health Care Limited: Here is investors’ chance to get treated by Padma Shri Vandana Luthra. Started in 1989 with just one center, this Everstone-backed company has now expanded to a network of 236 centers across 122 cities. This is a typical example of the kind of companies liked by the stock market. VLCC posted a profit of INR20.5 crore in the fiscal year ended 31 March 2015 on revenues of INR816.3 crore. The Gurgaon-based healthcare and fitness company plans to use INR308.7 crore from IPO proceeds for setting up new wellness centers in India and abroad, reducing debt levels, setting up a manufacturing facility, and further developing the brand. Everstone’s Indivision India Partners and Leon International Limited will be partially exiting through the IPO.
Larsen & Toubro Infotech Limited: At INR2,000 crore, L&T Infotech will be the biggest of the forthcoming IPOs this year in India. It will be an offer for sale (OFS) issue in which L&T will be selling up to 1.75 crore shares. The Mumbai-based engineering major is restructuring its portfolio and selling its non-core businesses but the infotech business has been classified as one which the company needs to “mastermind and grow”.
Equitas Holdings Limited: This could turn out to be the black horse of all the upcoming IPOs in 2016. Contraryto consumer brands whose products are often enjoyed by buyers, financial services players are often frowned upon. Nevertheless, this is a good business as Equitas Holdings’ double-digit net profit margin indicates. Top line continues to swell and despite growing competition, there seems ample room for new players. Equitas focuses on underserved individuals and micro and small enterprises (MSEs). Microfinance is no longer the buzzword it was five years ago but Equitas’ history here has played a crucial role in getting it a small finance bank license from RBI.
In addition, SEBI is scrutinizing prospectus from 12 companies which may get approvals in the coming months. There are some interesting names in this list such as SP Apparels, Thyrocare Technologies, and Ujjivan Financial Services. We will do a round up on these companies later. Happy investing!!
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