May 16, 2018
We grow used to newspaper headlines barking out “the hottest April ever” and, perhaps oddly, “the coldest April on record” (both of which now seem to be true), because we live in a world of complex superlatives, most of which will be forgotten in a week. But here’s one you would do well to remember: 2017 was the best year ever for India’s IPO markets, with more than $24 Billion being raised from local and overseas investors. And 2018 is looking even more encouraging for the subcontinent. But unlike weather forecasts, it ought perhaps to be entirely predictable that the fastest growing large economy on the planet should also have a thriving IPO market. A powerhouse for its global economic ambitions.
Last year saw the highest ever number of oversubscribed offerings on Indian markets (a sure sign of pent up consumer demand: think back to BT and British Gas IPOs in the 1980s). Astron Paper and Board Mill were oversubscribed by more than 243 times when the company’s offering was taken to market, eventually listing on the Bombay Stock Exchange at an astonishing premium of 140% (the stags will have been happy). The IPO of Salasar Techno Engineering also generated investor subscriptions running at 273 times value in July last year, making it the first company in over seventeen years to be oversubscribed on the Exchange by a factor of more than 270 to value.
But in the light of current trends, it certainly won’t be the last. Projections for performance across India’s IPO segment in 2018 all point to ever-stronger performance this year, despite a sluggish start with the ICICI Securities IPO last month (where market reaction was coloured- as generally within the Financial Services Sector- by key initiatives announced in the Union Budget). Operating in India’s critical mid market hotel sector, Lemon Tree Hotels saw its shares oversubscribed on offering last month by a factor of 114% (the QIB quota was subscribed 3.88 times to value). And of course we still wait with bated breath for the proposed mega IPO of the National Stock Exchange (NSE), India’s largest Bourse as well as a key platform for future market success in itself.
From this unique dual position of key platform and client, NSE’s Managing Director and CEO, Vikram Limaye is probably in as good a position as anyone to calibrate future trends, and he certainly wasn’t mincing his words last month when he reported on the progress of NSE’s IPO:
“We expect this year to be much better than last in IPO activity, both in terms of the number of offerings on our main Board and also in the SME Exchange”.
Red Ribbon’s Private Equity Fund aims to capitalise on these resurgent IPO markets, offering opportunities to participate in this, the world’s fastest expanding growth economy. And given India has always been at the heart of Red Ribbon’s investment strategies since the company was founded more than a decade ago, the company bring a unique level of specialist knowledge to leverage above market rate returns for its investors.
As was mentioned in last post, IPOs are more and more becoming a preferred exit route for private equity investment on the subcontinent, so it’s highly significant to note that IPO markets in India are now performing at an all time high. All in all it is very hard to disagree with Vikram Limaye’s prescient observation that nothing by way of market performance points to 2018 being any less of a record breaking year than 2017 has proved to be.
And as ever we will be keeping a close eye on detailed development in the sector too, in particular for the pointers which last month’s Lemon Tree IPO last month might provide for future trends in the mid market hotel sector, where Red Ribbon’s own Eco Hotels’ project is already making a significant market impact.