The IPO King

S. Ramesh hurriedly slips on his jacket even as he talks over the phone, pores over spreadsheets, and waves us to the chairs. The Initial Public Offering (IPO) mart is cut-throat; it helps that the managing director & CEO of Kotak Mahindra Capital Company (KMCC) multi-tasks well. For it’s one thing to bag a mandate; entirely another to price the issue right, sell it to investors, and list it to cheers all around. Ramesh and his team have done a nifty job; and that’s why KMCC is the IPO Dealmaker of the Year in the BW I-Banking Survey 2016 with the knowledge support of PwC.

“It’s been a superb year. Not only has there been a revival in the IPO market but investors are warming up to the new themes, ideas and getting a good listing,” says Ramesh. In 2015, IPO deals were up 465 per cent (in deal value) at Rs 13,750 cr from Rs 2,380 cr in 2014; the number of floats were up at 60 (48 in 2014). It’s not been easy though. Ramesh, who’s overseen more than 450 IPOs says there were a few months of easy times last year, but otherwise it has been challenging. “But fortunately, a market that allowed IPOs.”

It’s In The Air
Of the fresh themes that hit the mart, two stand out — Dr Lal PathLabs (diagnostics) and S. H. Kelkar & Co (fragrances and flavours); both of which were lead-managed by KMCC.

Dr Lal PathLabs was positioned as an asset light company. The issue received the highest QIB subscription of 64 times for an IPO in 2015; and an overall oversubscription that placed it among the top three IPOs. It was months in the works; and KMCC provided strategic direction on its structure, investor interest and timing. The Rs 638 cr IPO saw an overall demand worth Rs 14,916 cr across investor categories, and it is among the top 3 IPOs in 2015. It currently quotes at Rs 989 against an offer price of Rs 550.

The 90-year-old S. H. Kelkar & Co was a whiff of fresh air. It’s the largest domestic fragrance producer in India (20.5 per cent market share); the third largest (in India) after Givaudan and Firmenich (both multinationals). The IPO was launched (28th October) — a day after the Interglobe Enterprises IPO (Rs 3,108 crore) — but despite that investors lapped up the new plot — subscriptions topped Rs. 9,823 crore. The IPO price was fixed at Rs 180; S. H. Kelkar & Co currently trades at Rs 220 thereabouts.

“We have bought many first time themes to the market over the last 10 years. It gives us the opportunity to expand the market, and for investors to see newer growth companies,” says Ramesh. The discerning IPO investor looks forward to issues that left something on the table. “What’s most heartening in an IPO is to see a stock do well on listing on the bourses, because, at the end of the day , to see the stock do well is the best feeling”.

2015 saw many investors coming back to IPOs, despite a slack in the secondary markets. “In many ways, 2015-16 has been a year of re-christening the IPO market,” states Ramesh. “Investors are very analytical, and are not part of a herd mentality; they are differentiating between the men and the boys within the same sector, and even in individual companies.”

Ramesh reckons the IPO market will continue to be robust as some big names are set to hit the bourses.

“Our secret or philosophy is that while our pipeline is robust, we do not launch an issue till we are confident of the response from investors,” says Ramesh. Watch out for KMCC in 2016; it may do an encore!