The year 2019 was a mixed bag for investors – while those invested in primarily large-cap stocks made money, others who had reposed their faith in mid and small caps had a poor run.
The market for Initial Public Offering (IPOs) however, proved to be beneficial yet again. In fact, IPOs made more money for investors than even large caps and mid-cap stocks.
With top IPOs like SBI Cards, LIC, Bajaj Energy among others, 2020 has an impressive lineup. About 40-50 companies are expected to go public this year, looking to raise money to the tune of Rs 40000-50000 Crores.
So without further ado, let’s take a look at who these companies are, and what’s in store for IPO investors in 2020. Read On!
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In this article
- SBI Card And Services
- Life Insurance Corporation ( LIC)
- Bajaj Energy
- Computer Age Management Services ( CAMS )
- UTI Asset Management Company
- Burger King India
- Home First Finance Company
- Equitas Small Finance Bank
- Park hotels
- National Stock Exchange ( NSE )
SBI Card And Services
The much-awaited IPO of SBI Cards will open for subscription on 2nd March 2020. Expecting to raise around 9000 Cr, the price range of each share has been fixed at Rs 750-755, with each lot size fixed at 19 shares.
Retail customers are allowed to place an order for a maximum of 13 slots only which caps the amount at Rs 186,485. Here are the other details.
|IPO Date||Mar 2,2020- Mar 5,2020|
|Face Value||Rs 10 per share|
|IPO Price||Rs 750 to Rs 755 per equity share|
|Min order quantity||19 shares|
|Bid offer opens||Mar 2, 2020|
|Bid offer closes||Mar 5, 2020|
|Application||Lots||Shares||Amount ( Cut-off)|
About The Business.
What most people assume about SBI Cards and payment services is that their main business is only limited to credit cards. However, a large part of the company’s revenue is generated by the payments’ services wing of the business as well.
Now how do they provide payment services?. The answer lies in the fact that several vendors sell their products and services but do not receive the money from customers directly.
Instead, they use payment services to facilitate this exchange. So SBI card provides their payment facility to such vendors which becomes a revenue stream for SBI.
When the company goes public, the sum so raised will be utilized towards establishing SBI as a strong payment gateway as well as expand its credit card business further. With a promising growth potential hence, SBI cards and services become an enticing opportunity for investors.
How Will SBI Cards Raise Money?
So does SBI plan on diluting its shares? First, it is going to bring an IPO where shares worth Rs 500 will be sold. Apart from this, a major part of the shares is going to be sold through an OFS. OFS stands for “ Offer for sale”.
A company goes for an IPO to raise funds for business expansion. However, the amount raised during IPO may not suffice and in such situations, the company can opt for an offer for sale ( OFS).
In an OFS, the existing shareholders like promoters, sell their stake in the company. The shares given up by the promoters are then made available to different investors ( retail, Foreign institutional investors, etc) directly for sale.
Also Read : Why Should You Invest In An IPO
If we talk about SBI’s financials, the company has shown a strong performance, with a 35% increase in revenue in the 2018-2019 period. Profits also increased by more than 36% during this period.
Life Insurance Corporation ( LIC)
The second-biggest IPO and another highly anticipated one is the LIC IPO. LIC is a 100% government-owned company. The decision to privatize LIC, which was announced in the Union Budget 2020 has created quite a buzz in the investor community.
If reports by different analysts are to be believed, the estimate of LIC’s valuation will be between 8 -10 Lakh Crores and the government has announced the selling 10% of its stake in the company.
This means the size of the IPO would be between 80,000 Crores To 1 Lakh Crores, making it the biggest IPO in India’s history.
As a name, LIC is not unknown to us. Until 2000, if you wanted to buy any life insurance, LIC was the only option, ergo it has a monopoly over the insurance market.
Till 2000, all LIC application processes were also done offline. So if you ever had to buy a policy, the only way to do so was through an LIC agent.
LIC’s agent network was pretty extensive, PAN India. This number was around 10 Lakh in 2000. However, after 2000, many private players entered the insurance space.
They started selling different kinds of insurance policies aided by banking networks. Now at this point, LIC had a golden opportunity to push their insurance policies through public sector banks and leverage the network, however, the company didn’t pay much heed to it to the shifts taking place.
Despite all this, if we look at the numbers, LIC still has a strong foothold in the insurance space. In India right now, if we assume 100 policies are sold every day, then out of these 76 are sold by LIC. LIC still holds the first preference with first-time insurance buyers.
LIC is a huge company, that has made several investments in other companies as well. Some of these include marquee names like IDBI Bank, ITC, Yes Bank, among others.
This means, if these companies perform well, LIC will reap good profits as a large chunk of the company’s profits come from these investments. Consequently, if you want to invest in LIC IPO, it is also important to pay attention to the companies LIC has invested in, and their future potential.
Apart from all this, there is another reason why LIC’s IPO is important. If we talk about the budget this year, the government announced its revenue targets for the year as 2.1 Lakh Crores. Out of this 70,000Cr amount, that is 1/3rd of the amount will be raised by the IPO. The dates for the LIC IPO subscription are yet to be declared.
Bajaj Energy is India’s third-largest private sector company for thermal generation. Not only is Bajaj Energy involved in power generation, but it also does the work of financing other companies. The parent company of Bajaj Energy is Bajaj Power.
Bajaj Energy has filed for its Red Herring Papers ( the starting process to file for an IPO). The company will reportedly, look to raise Rs 4500 Crore through the IPO.
When it comes to the company’s financial data for the year 2017 and 2018, the revenue generated by the company in 2017 was Rs 6500 Crore. In 2018 the revenue was recorded as Rs 7200 Cr, which a marked increase.
In the year 2017, the company made a loss of approx. Rs 1,100 Crores. Bajaj Energy, however, managed to turn the situation around in 2018, reporting a profit of Rs 42.12 Crores.
Computer Age Management Services ( CAMS )
The IPO size is estimated to be around INR 1500 – 1600 crores. The prominent investors in CAMS include Warburg Pincus, NSE Investments, HDFC, and HDB Employees Welfare Trust.
The Chennai based company with more than 30 years of operations, is the largest Registrar and Transfer Agent (RTA) for the Mutual Fund industry.
UTI Asset Management Company
UTI Mutual Fund was the first mutual fund to be operational in India. It will be the third AMC to list on Indian stock exchanges, after Nippon India AMC (erstwhile RNAM) and HDFC AMC. The issue includes an offer for Sale by various shareholders, like State Bank of India, Bank of Baroda, LIC, Punjab National Bank and T Rowe Price. The size of the IPO is estimated to be around INR 3800 – 4800 crores. UTI AMC is the seventh-largest AMC by Assets under Management (AUM)
Burger King India
Burger King is set to raise INR 400 crores this year, as it continues with its aggressive expansion plans. It is the Indian arm of US-based Burger King. The chain started operations in India in the year 2014 and is a direct competitor of McDonald’s, which has approximately 42 percent market share in the burgers and sandwich category.
Home First Finance Company
The company is engaged in mortgage financing, especially in the affordable housing segment. The IPO size is expected to be in the range of INR 1500 crores.
The issue includes capital raising efforts as well as an offer for sale in which existing investors like True North Fund, Aether from Mauritius, GIC and Bessemer India Capital Holdings will participate.
The company was formed by Citibank veterans Mr. Jerry Rao and Mr. P S Jayakumar, in the year 2010.
Equitas Small Finance Bank
The size of this IPO will be INR 1000 crores, out of which INR 800 crores will be a fresh issue and balance would be an OFS. Equitas Small Finance Bank, through Equitas Housing Finance, limited has been offering housing finance and also has been into vehicle financing and Micro and small enterprise financing ( MSME ).
It started as a microfinance company in 2007, was granted a small bank license in 2015 and formed as a bank in 2016 after merging the housing and microfinance divisions.
The hospitality company which has a chain of luxury, boutique hotels under ‘The Park’ brand is part of the Apeejay Surrendra group. It has several properties in major cities across India.
The size of the IPO will be INR 1000 crores, which shall have a fresh issue of approximately INR 400 crores and an Offer of Sale of INR 600 crores, being offered by Apeejay’s group companies.
The amount raised shall be utilized towards settling existing debt and for other operations as well
Also Read: What is the Difference Between IPO and NFO
National Stock Exchange ( NSE )
The IPO would comprise an offer for sale by multiple shareholders, including the State Bank of India, which has a 5.19 percent stake in the exchange. NSE had earlier tried to raise funds through IPO in 2016 as well. In 2019, SEBI had barred it for six months from approaching the markets.
The IPO is expected in the third quarter of the current year.
Some other IPOs slated for this year are:
SAMHI Hotels, Mazagaon Dock Shipbuilders, Integrated Renewable Energy Development Agency (IREDA), Emami cement, Easytrip Planners ( operators of easemytrip.com )
The year seems to be exciting for stock market investors. The recent success of certain IPOs points to a promising 2020. Though exercising caution while evaluating the companies’ records, finances, area of business and management is very important.
Disclaimer: The views expressed in this post are that of the author and not those of Groww.