Is there a revival in Indian IPO markets?
This morning when I was on my way to the office, I turned around a corner and saw a big red billboard on top of a hotel.
I had to wait at a traffic signal, and that is when I saw the same billboard on top of five other hotels.
All the boards had one mention on them, ‘OYO'. Something that started as a part-time activity has developed into a full-fledged business empire.
Ritesh Agarwal came up with the idea of OYO (On Your Own) Rooms when he was 19 years old, and at the age of 19, I was still wondering which professional course to pursue.
Agarwal became the youngest billionaire in India. He has always been a source of inspiration for me, and I have loved the business idea of OYO.
While going through some financial dailies, I came across a few articles which mentioned that the company is soon coming out with an initial public offering (IPO).
After a lacklustre wait, the remainder of this year is set to see some big names roll out their initial public offers.
Apart from OYO, there's one more company – Inox Green Energy – whose business I find interesting and it is also coming out with an IPO very soon.
Let us take a detailed look at the IPO details of both these companies.
Inox Green Energy IPO
CEO of Inox Wind, Kailash Lal Tarachandani, said in an interview recently that Inox is planning to launch the IPO of Inox Green Energy in the coming 35-40 days.
This could mean Inox Wind may come out with its IPO in October 2022.
Inox Green Energy is a subsidiary of Inox Wind. It is engaged in providing long-term operation and maintenance (O&M) services for wind farm projects, specifically for wind turbine generators (WTGs) and common infrastructure facilities on wind farms, which support the evacuation of power from such WTGs.
The CEO said that Inox Green Energy has witnessed a whopping growth of 30-40 per cent every year. The company is presently operating at a volume of Rs 1.6 billion. In the coming 3-4 years, this would increase to Rs 4-5 billion.
The company filed its draft red herring prospectus (DRHP) in June 2022. This was not the first DRHP filed by the company by the way. It had filed a DRHP even in February 2022 but it withdrew without citing reasons.
According to the last DRHP filed, the proposed offer will be of Rs 7.4 billion.
50 per cent of the total offer will comprise new equity shares, and the remaining 50 per cent will be on an offer-for-sale (OFS) basis.
Last week, the company received market regulator's approval to go ahead with the IPO.
Investors are waiting with bated breath as this IPO could mean a diversification in the renewable energy segment for them.
And we all know the profound love the market has with the term ‘green energy'.
So this could be an exciting IPO to watch out for.
OYO Rooms IPO
OYO Rooms, also known as OYO Hotels & Homes, is an Indian multinational hospitality chain of leased and franchised hotels, homes and living spaces.
Founded in 2012, OYO initially consisted mainly of budget hotels. As of January 2020, it has more than 43,000 properties and 1 million rooms across 800 cities in 80 countries.
OYO filed its DRHP in October 2021. However, shortly after that, the massive market correction started and due to that grey cloud hovering over the Indian IPO market. Hence OYO didn't go further with the offer.
But the scenario has changed now. OYO planned to reap the benefits of this changed scenario, and on 19 September 2022, OYO filed an addendum to its existing DRHP.
According to the DRHP, the proposed IPO will of Rs 84.3 billion. Out of the total offer, shares worth Rs 70 billion will be new equity shares, and shares worth Rs 14.3 billion will be on an OFS basis.
In the addendum filed, the company reported total revenue of Rs 14.6 billion. For the very first time, OYO reported positive EBITDA. It reported an EBITDA of Rs 70 million. The company's losses were narrowing down, but this is the first time that it reported a profit.
However, the company has reported a net loss of Rs 4.1 billion.
The gross booking value per hotel stood for the quarter ended June 2022 stood at Rs 3.3 lakh. On a YoY basis, it has increased by 47 per cent.
The company is yet to receive a response from the regulator.
This could be another exciting IPO to watch out for because the scenario for hospitality and hotel sector has changed.
Hotel stocks are booming and majority of companies have reported good results in the first quarter.
Now, both the companies have made big plans for going public but is this the right time? Especially, considering the recent turbulences in the IPO market?
This Could Spoil The IPO Buzz
Looks like Virat Kohli's bad luck is not just restricted to the cricket field. It has followed him in the financial markets too. Earlier this week, Virat Kohli-backed Go Digit General Insurance IPO was kept in abeyance by the market regulator.
The proposed IPO offer is expected to raise Rs 12.5 billion through issue of fresh equity shares and the rest would be raised by selling 109.4 million shares of promoters and existing shareholders.
This move by the regulator raises the question of companies' decision of coming out with IPO in the current market scenario.
Newly listed Tamilnad Mercantile Bank IPO opened at a huge discount and still, the share price continues to fall.
Investors were trying to get their faith back in Indian IPO markets but the Tamilnad Mercantile Bank listing on discount and market regulator holding back the IPO of Go Digit Insurance, have dampened the IPO activity.
Indian IPO Markets Are Reviving, But…
The Indian IPO market was already under pressure because of market volatility. The markets have corrected and investors are still cautious.
Investors are still reeling from the losses of Paytm and Zomato. Adding insult to the injury is the falling share price of LIC. Investors had in bulk applied for the mega IPO of LIC.
When these companies came out with IPOs, investors thought these would turn out to be the next big multibagger stocks . But unfortunately, that did not happen. The shares were badly beaten down on the bourses.
Now, investors are very cautious about loss-making companies. No matter how good a business is, investors might not trust it if can't show earnings capacity.
Companies understand this well. Investors have raised several red flags before investing in an IPO. Hence, many companies are holding back from coming out with IPO even when their IPOs are approved.
Currently, the company with urgent financial needs are opting to go for private funding because of market uncertainty.
For example, the leading pharmacist PharmEasy withdrew its offer, citing the market conditions and strategic issues. The company said it will raise funds through the rights issue.
On the other hand, the Q1 results of companies showed some optimism as many companies reported good quarterly numbers.
Also, the broader markets have traded positively in the last one month. Investors were back looking for the best smallcap stocks to buy and the best midcaps before the festive season kickstarts.
All this has boosted investors' confidence, and hence, they look forward to new companies too.
But how the IPO activity pans out in the remainder of this year is yet to be seen.
To know more, check out the upcoming IPOs on our website.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)