3 Big IPO Around the Corner. The IPO Market is Back from the Dead

The IPO market in India is picking up steam.

IPO listings took a breather after February 2022 as markets turned volatile on the back of geopolitical factors, inflation, and recession fears. FII selling also weighed heavily on the IPO market.

Investors also lost their appetite for richly priced issues after the disappointing performance of several startup IPOs, including Paytm-parent One 97 Communications, and Zomato, in 2021.

However, as market sentiment has reversed with a sharp rally in markets, IPOs are now gaining traction with no signs of slowing down.

There have been many IPOs that have already hit the street, and more will be announced before the year's end.

Here are three IPOs around the corner to watch out for.

#1 Aadhar Housing Finance

First on our list is Aadhar Housing Finance.

The company filed its DRHP (Draft Red Herring Prospectus) with the market regulator in January 2021. It got approval for the same in May 2022.

The company is seeking a Rs 73 bn valuation. The offering will comprise a new issue up to Rs 15 bn and an offer for sale of Rs 58 bn. The proceeds will boost its tier-one capital base.

The company aims to tap the public market around mid-October to November. The IPO will be managed by ICICI Securities, Citigroup Global Markets, and SBI Capital Markets.

Aadhar Housing Finance is a housing finance company in India. It offers products ranging from mortgage loans to loans for construction and acquisition.

As of the financial year 2022, it has the largest customer base and the highest disbursal rate. It was also the largest housing finance company by Assets Under Management (AUM).

It is one of the largest housing finance companies in the Indian mortgage market, with extensive branch networks. This helps the company with loan sourcing.

The company has partnered with TCS for its end-to-end business process. It is a blockchain-based cloud platform.

For the financial year 2023, it is focusing on the low-income housing segment in India.

#2 Five-Star Business Finance

The second on the list is Five Star Business Finance.

Five Star Business Finance filed its DRHP in October 2021 with the market regulator. It got approval for the same in January 2022.

The company is seeking a valuation of Rs 27.5 bn. The entire amount will be an offer for sale by the existing shareholder. The main reason for the IPO is to get the benefits of listing on the stock exchange. The company aims to tap the public market around mid-October to November.

The IPO will be managed by ICICI Securities, Kotak Mahindra Capital, Edelweiss Financial, and Nomura Financial Advisory as book running lead managers.

Five-Star Business Finance provides secured business loans to micro-entrepreneurs and self-employed individuals.

It has the fastest AUM growth among its peers with more than Rs 30,000 m in AUM, with strong return and growth metrics and a significant potential addressable market.

The company has the best asset quality among lenders extending MSME business loans, with other lenders over 95% of its loan portfolio comprising loans from between ? 0.1 m to ? 1.0 m in principal amount. The company has provided loans to more than 185,000 customers in total.

The risk with the company is it had negative cashflows in the past and can continue to incur in future.

For the financial year 2023, the company will optimise the borrowing costs, reduce operating expenses, and diversify the lender base.

#3 Ixigo

The third on the list is Ixigo.

Le Travenues Technology, better known as Ixigo, filed its DRHP with the market regulator in August 2021. The prospectus got approval in December 2021.

According to the prospectus, the company is seeking a Rs 16 bn valuation. It consists of a fresh issue worth Rs 7.5 bn and an offer for sale for Rs 8.5 bn.

A minimum of 40% of the IPO proceeds will be for funding the growth initiative as discounts and other promotional incentives for increasing the customer base. The rest will be utilised for general corporate purposes. The company is planning to launch the IPO in mid-December 2022.

The book-running lead managers for the issues are ICICI Securities, Axis Capital, Kotak Mahindra Capital Company, and Nomura Financial Advisory and Securities.

Ixigo is India's leading AI-based online travel portal, providing a one-stop solution for travelers. The company is the largest online travel agency for trains.

For the financial year 2022, it touched 5 m daily active users cumulatively across the portal. It also crossed 8.5 m monthly downloads and 55.5 m monthly active users in March 2022.

The company is in the phase of expansion and has acquired three companies to increase the customer base and penetration across tier two cities.

Monthly active users of the company are around 380 m, the highest among private peers.

For the financial year 2023, the company is looking for growth in volumes due to two times increase in demand.

To Conclude

An initial public offering is a great way to buy a company with high growth potential at cheap prices. It can fetch a high-profit percentage in a short time while also grow funds in the long run.

IPOs offer some of the biggest opportunities to create wealth. Some emerging players can change the ballgame forever. Once you spot a winner, take a backseat, and enjoy the gains on your investment.

But it is not as easy as it sounds. The critical part is to choose the right companies.

As with other types of investing, putting your money into an IPO carries risks. In fact, there are more risks with IPOs than buying the shares of established public companies. This is because there is less data available for private companies.

One must always evaluate the viability of the business. It includes insights into products and services, strengths, and long-term growth opportunities.

Along with this, the financial position plays an important role. Constant growth in revenue and sales is essential for future performance. It is also important to look at promoter's stake and underwriting of the IPO.

Sometimes, due to the hype of the stock in the market, the IPO can get overpriced. It could further lead to a crash post-IPO. It was one of the reasons for the failure of one of the biggest IPO Paytm.

For more information on IPOs, check out the list of upcoming IPO's.

You can also find out the performance of past IPOs here.

Also watch the video below where Richa Agarwal explains what to look for in a winning IPO.

Happy Investing!