PE-backed Companies Queuing up the Market with IPOs :)

pressure from PE players is forcing companies to take the IPO route

The buoyancy in the capital markets over the past few weeks has seen a spate of initial public offerings (IPOs) hitting the market.

Sectors such as infrastructure, power and real estate are the ones that have been most bullish.

However, most companies that are taking the IPO route for raising funds are the ones that have strong private equity (PE) backing.

And in most cases, it is the pressure from these PE players that is forcing these companies to take the IPO route.

Recently, four real estate companies – Emaar MGF Land, Lodha Developers, Sahara Prime City and Ambience Ltd – filed draft red herring prospectuses (DRHPs) with the market regulator Securities and Exchange Board of India (Sebi) to launch their IPOs.

All the four together are looking to mop up over Rs 11,000 crore.

Said Jagannadham Thunuguntla, equity head, SMC Capitals Limited, “Several companies are filing their IPO prospectuses with Sebi, with the confidence provided by the strong capital market bounceback and the healthy subscription levels seen by the IPOs of Adani, NHPC and OIL.”

“Taking the capital market bounce-back as a good exit opportunity, several PE-backed companies are queuing up with their prospectuses.

While this trend of PE-backed companies filing prospectuses can be seen across industries, it is quite prominent in the real estate industry,” he added.

According to him, “Several companies which have filed their prospectuses in the past three to four days have PE backing at the corporate or SPV levels.

The recent capital market bounce-back is giving a fresh breath of life to PE players” he added.

This trend of PE-backed companies going to the market with IPOs is not a surprise. PE firms are keen to capitalize on the buoyant financial markets and exit certain investments.