After a successful year in primary markets, India is looking forward to yet another eventful set of performances in 2018. Excluding the public offer of Astron Paper & Board which will make debut on 29 December, India’s primary market saw 37 IPOs in 2017 with 27 issues offering positive returns on the closing basis. While this is the best performance in recent years, a strong pipeline of draft prospectus filed with market regulator SEBI holds promise for a busy 2018 at IPO street. Here is a list of top upcoming IPOs in 2018.
Hindustan Aeronautics Limited
Government-owned Hindustan Aeronautics is a Navratna defence equipment maker. The company filed draft prospectus in September and received SEBI approval in October. Through the IPO, which will be a full Offer For Sale (OFS), the government plans to sell 36,150,000 shares. The dilution of 10% is expected to yield the government anywhere from INR2,000 crore (INR20 billion) to INR2,500 crore (INR25 billion). In the financial year ended 31 March 2017, the company posted earnings of INR2,624.7 crore on a top line of INR19,596.9 crore.
The company is into design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures. For investors, a key takeaway is that Hindustan Aeronautics has a sustained track record of profitability and has paid dividends to shareholders (which has been the government so far) every year for over four decades. As Hindustan Aeronautics pays dividends regularly, the IPO will appeal to dividend investors as a portfolio stock.
Depending on the performance of Hindustan Aeronautics IPO, the government may also expedite the public offers of Pawan Hans and Airport Authority of India (AAI) which have remained in the pipeline for long.
With the exception of PSU insurance companies, investors benefitted from recent IPOs of PSUs and their subsidiaries’ such as Cochin Shipyard, HUDCO, Mahanagar Gas, and PNB Housing Finance. Although pricing strategy of insurance IPOs was on the higher side, we hope better sense prevails in the government when it launches Hindustan Aeronautics IPO.
National Stock Exchange (NSE)
If BSE had a bumper listing in 2017, NSE promises to make it worthwhile in 2018. The country’s biggest stock exchange filed draft prospectus with SEBI in December 2016 and is now quite close to win the regulator’s approval following several clarifications. As it is widely known, the stock exchange wasn’t initially open to the idea of listing but eventually agreed while also recommending an overseas listing. The IPO will not result in funds inflow for the company as all the shares will be sold by existing shareholders through the OFS route. The company’s shareholders include several prominent names like SBI, LIC, IFCI, IDBI Bank, Goldman Sachs, Stock Holding Corporation, Tiger Global and Citigroup.
With fat profit margin of 45% according to latest data available for six months ended September 2016, NSE is not in need of funds. NSE IPO is going to be among the largest public offers in the recent years but considering the immense liquidity in the market and NSE’s strong credentials, the offer’s large size is unlikely to create any issues.
Also included in the list of upcoming IPOs in 2018 is Gurgaon-based ACME Solar Holdings. The renewable energy company filed draft prospectus with SEBI in September 2017 and promptly received the regulatory go ahead in December. The solar power producer, which has operational projects of 1,043 MW peak power, is looking to raise as much as INR2,200 crore (INR22 billion) through the IPO. Promoted by Manoj Kumar Upadhyay, Acme Solar also has several projects under construction and expects to take its capacity to 2,351 MW peak by November 2018. The company plans to use majority of IPO proceeds towards reducing debt.
ReNew Power is another clean energy venture looking to raise funds from the primary market. The Gurgaon-based company claims to be the largest renewable power firm in India with operational power generation capacity to over 2,000 MW. Backed by Sumant Sinha, the company counts Goldman Sachs, Abu Dhabi Investment Authority, Asian Development Bank (ADB), and Global Environment Fund among its major investors. Last year, it raised nearly USD200 million from Japan’s JERA – a joint venture between Tokyo Electric Power (TEPCO) and Chubu Electric Power, valuing the company at nearly USD2 billion. The company is reported to have roped in Goldman Sachs, Kotak and JM Financial for the IPO which may raise INR4,500 crore (INR45 billion).
Successful listings by these two players could do wonders for the sector which has more IPO hopefuls. For example, Hyderabad-based Mytrah Energy and Chennai-based OPG Power are listed on London Stock Exchange’s Alternative Investment Market (AIM) and are actively considering listing themselves in India. Another player studying the IPO market is Blackstone-backed Hindustan Power Projects (HPPL) which may benefit if the stock market’s response to renewables turns out to be positive.
Galaxy Surfactants is also quite high in the list of top upcoming IPOs in 2018. The Navi Mumbai-based specialty chemicals player filed prospectus with SEBI in November for its OFS IPO. The home-grown chemical player is a supplier to FMCG companies and counts Cavinkare Private Limited, Colgate-Palmolive (India) Limited, Dabur India Limited, Henkel, Himalaya, L’ORÉAL, Procter & Gamble (P&G), Reckitt Benckiser and Unilever among its clients. In the latest year ended 31 March 2017, it posted revenues of INR2,171.7 crore (INR21.7 billion) with robust earnings of INR146.3 crore.
As a domestic success story that started in 1986, Galaxy Surfactants has its charm as a startup that scaled up beautifully. Nevertheless, it is worth highlighting that the company has expanded into overseas markets of Egypt and USA and currently operates two of its seven plants in foreign markets.
Hyderabad-based Apollo MicroSystems is a supplier of electronic and electro-mechanical components as well as engineering designs solutions to defence, space and home land security markets. It counts the Indian government and several other defence players among its customers. As a defence play which has received tremendous support from the government in the last few years, Apollo MicroSystems IPO will be a closely watched development. At the same time, its impeccable record of soaring top and bottom line in each of the last four years is going to attract investors.
Reliance General Insurance
Insurance companies may have left a negative impression on investors last year but HDFC Standard Life’s positive performance has clearly sent the message that the market is willing to put a premium on management quality. Reliance General Insurance will look to tap the primary markets in 2018 and HDFC Standard Life’s good show is likely to help it, although investors may have a hard time in drawing parallels between the two companies. Nevertheless, Reliance Nippon Life Asset Management – Anil Ambani Group’s last venture in the primary markets – had a successful listing and it may go in favor of the listing of general insurance arm.
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Meanwhile, the Indian government brought IPOs of General Insurance Corporation (GIC) and New India Assurance but isn’t done yet and 2018 is likely to see the stock market debut of National Insurance. The general insurance company is yet to file paperwork with SEBI but industry sources expect the IPO to hit in the first quarter of calendar year 2018. The insurer has already received an in-principle approval from the Insurance Regulatory and Development Authority (IRDA) and it should help in speeding the process. Like its PSU peers, the company will not get any funds and all IPO proceeds will go to the government. Considering the company’s expected valuation of INR20,000 crore (INR200 billion) and 10% to 15% dilution, the IPO is likely to raise anywhere between INR2,000 and INR3,000 crore.
Another prominent name in the list of upcoming IPOs in 2018 is ICICI Securities which has submitted paperwork with the market regulator seeking permission for the public offer. The company is fully-owned by ICICI Bank and the parent plans to sell 64,428,280 shares through the OFS route. ICICI Bank has listed its life insurance and general insurance ventures in the last couple of years and ICICI Securities will be the fourth group company to list on the stock exchanges.
The pioneer in the e-brokerage business is the owner of the ICICIdirect platform that catered to 692,689 active clients as of 30 September 2017. The company is the largest broker in India and has retained the title since 2014. With soaring stock markets, players like ICICI Securities stand to benefit as direct participation of retail investors increases. The company has posted solid financial performance in recent years including a 47% jump in earnings to INR245.7 crore in the six months ended 30 September 2017, according to the draft prospectus. This could be an interesting way to play the stock market rally itself!
Another big name in the list of upcoming IPOs in 2018 is IRCON International. This is a contender from the Indian government to fulfill its divestment agenda. The engineering and construction PSU, currently fully-owned by the government, plans to offer 9,905,157 shares in the IPO. In all, IRCON IPO is likely to mobilize INR550 – 600 crore through the OFS route.
Despite being a PSU, the company has a solid reputation when it comes to parameters like execution capabilities and technical expertise. This is underlined by the fact that the company has five overseas project offices in Sri Lanka, Bangladesh, Malaysia, South Africa and Algeria to provide onsite support overseas. It also has 26 project offices and five regional offices across India. Being a PSU, the company pays generous dividend and this might be a great draw for dividend investors, although its profitability has reduced in recent years.
Crystal Crop Protection
Everstone-backed agrochemical company Crystal Crop Protection has already received SEBI approval for its INR1,000 crore IPO. The company, which is also agriculture equipment and seeds, plans to raise INR545 crore through a fresh issue while promoters and existing shareholders including Everstone Capital plan to sell shares worth INR455 crore. The Ahmedabad-based company has seen volatile market conditions and profits in recent years and this could be an important factor for investors despite presence of a well-known PE firm like Everstone.
The sheer presence of Renuka Ramnath’s private equity firm Multiples, value investors Ashish Kacholia and Suresh Kumar Agarwal as large shareholders should be enough to spike interest in one of the most promising upcoming IPOs in 2018. The Bengaluru-based company has filed draft prospectus with SEBI and is awaiting regulatory nod for INR500 crore (INR5 billion) IPO. It is important to note that the company will not get any funds from the IPO as all shares will be sold by existing shareholders. Thsi shouldn’t be a cause of concern for IPO investors though, as Milltec Machinery has a robust business model and has been delivering smartly on the financial performance front. Read more about the company here.
Upcoming IPOs in 2018: More to be added
As one can gauge, this is only an indicative list and more IPOs will be added as we move in the next year (at any time, you can check the full list here). Like last year, there will be instances of companies filing their prospectus, getting approvals and launching offers in a matter of months. Already, a number of companies such as CMS Info Systems, Barbeque Nation Hospitality, and Sandhar Technologies have either filed prospectus or have received regulatory approvals.