Tata and LG's billion-dollar IPOs face investor test next week
What's the story
India's primary market is set for a major test next week with the launch of two massive initial public offerings (IPOs) from Tata Capital and LG Electronics. The two companies will aim raise over ₹27,000 crore in total through their respective IPOs. Tata Capital's ₹15,500 crore IPO will open on October 6, followed by LG Electronics' ₹11,600 crore offering on October 7.
Liquidity issues
Large IPOs historically struggle to deliver returns
The simultaneous launch of these two mega-issues has raised concerns over market liquidity. The massive capital inflow could potentially strain a market showing signs of fatigue. Historically, large IPOs have struggled to deliver investor returns. For instance, HDB Financial's ₹12,500 crore IPO in July gained 14% on listing day but now trades just 4% above its issue price. Last year's NTPC Green Energy ₹10,000 crore offering still languishes below its ₹108 issue price.
Market resilience
Recent successful IPOs have bolstered investor sentiment
Despite these challenges, recent successful IPOs such as Hyundai Motor's record-breaking issue and Swiggy have kept investor sentiment strong. SBI Securities's Sunny Agrawal said that while many companies are getting listed, finding value in most of them is difficult as they are fully priced with little value left for incoming investors.
Market predictions
Managable impact on market liquidity, say experts
Anand Rathi's Narendra Solanki believes the impact of these massive IPOs on market liquidity will be manageable. He said, "There might be some impact, but I do not see that it would be so much that the market would be feeling threatened about it because we have a lot of liquidity coming out in terms of SIP flows." PRIME Database Group Managing Director Pranav Haldea cautions against short-term thinking when it comes to judging IPO pricing and performance.