2020 finally comes to an end and in more than one ways, it has been a watershed year. Investors were subjected to a sharp and brutal selloff not witnessed in decades but the stronger hands were also rewarded with an equally impressive but unanticipated recovery. With the markets now in much better shape, investors have reasons to look more favorably at 2021. This is especially true for the upcoming IPOs in 2021 since high liquidity and better sentiments will mean more initial offerings in this year.
#1 Indigo Paints
The Sequoia Capital-backed company is among the fastest growing paint companies in India and competes with the likes of Asian Paints, Berger Paints, Kansai Nerolac Paints and Akzo Nobel. Indigo Paints has three manufacturing plants in Rajasthan, Kerala) and Tamil Nadu and plans to use IPO proceeds towards expanding its production capacity.
Indigo Paints IPO size is likely to be around INR1,000 crore (INR10 billion) which will include a fresh issue of shares worth INR300 crore. The company with MS Dhoni as brand ambassador earned INR27.2 crore in the six months ended 30 September 2020 while clocking revenues of INR260.2 crore. The company received SEBI approval on 31 December 2020 and the IPO is likely to be launched in January 2021.
#2 Indian Railway Finance Corporation (IRFC)
IRFC IPO is likely to be around INR4,600 crore in terms of size and will include a fresh issue of shares worth INR3,100 crore, making it among the biggest offers of the year. The PSU under the Ministry of Railways acts as the financing arm of Indian Railways and offers project financing and rolling stock leasing to railways. The company boasts of superb profitability which stood at 26.7% in FY2020 and being a PSU, it pays regular dividends.
Given the governments continued focus on railway infrastructure upgradation, IRFC has bright future and its low-risk business model makes it a suitable investment option for IPO investors. IRFC received SEBI approval in February 2020 so it is likely to launch the IPO soon.
#3 Home First Finance – First of the upcoming IPOs in 2021?
Home First Finance could very well be the first of the upcoming IPOs in 2021 and the True North-backed mortgage lender plans to mobilize as much as INR1,200 crore. While True North owns about a third, another private equity major Warburg Pincus holds 25% stake in the affordable housing financier.
The company serves salaried and self-employed customers and targets first time home buyers in low and middle-income groups with an average ticket size of INR10.2 lakh (INR1.02 million). Home First Finance boasts of growing operations and strong profitability in double-digit percentage figures.
#4 RailTel – Another one from railways
RailTel Corporation will be another IPO from the PSU stable during the year and it will be purely an OFS offer to the tune of INR736 crore. The company is tasked with the responsibility of modernizing Indian Railways’ telecom system. RailTel has debt-free operations and boasted of decent cash & cash equivalents of INR368 crore at the end of FY2020.
#5 Kalyan Jewellers
Kerala-based Kalyan Jewellers plans INR1,750 crore IPO with an issuance of fresh shares worth INR1,000 crore. Private equity firm Warburg Pincus has a 24% stake in the company through its unit Highdell Investment. Thanks to its advertisement campaign featuring Amitabh Bachchan, the company is a well-known name now and its widespread network of 107 showrooms across India and 30 in the Middle East also helps in leveraging this brand familiarity.
Kalyan Jewellers IPO will expand the options for investors looking to play the domestic jewellery theme. As of now, Titan and Thangamayil Jewellery are the only focused plays on domestic markets. However, stagnant topline and limited profitability are major issues with this investment.
#6 Nazara Technologies – Gaming + Tech
Mobile gaming leader Nazara Technologies is another high-profile company in the list of upcoming IPOs in 2021. The company behind popular games such as World Cricket Championship, Chhota Bheem Race, Motu Patlu Race first filed its prospectus in January 2018 but its plans didn’t materialize even after receiving SEBI approval.
As part of India’s tech companies likely to get listed, Nazara Technologies will be closely watched as a result of its dominant position in a high growth area. According to the previously filed prospectus, the company registered revenue of INR56.1 crore in FY2013 but the corresponding figure is likely to swell to INR470 crore in FY2021.
#7 LIC – Biggest of the upcoming IPOs in 2021
Life Insurance Corporation of India (LIC) is simply the most anticipated IPO in India this year. The insurance major is likely to be valued more than INR13 lakh crores. Given the humongous size of the company, even offering 5% equity in the offer is likely to result in INR65,000 crore float. It will require several changes in the regulatory and market setup to accommodate the size of the IPO.
As of now, Coal India IPO takes the crown of the biggest public offer in India and its size of INR15,200 crore presents the stark difference between the two IPOs. However, this size is likely to help retail investors with firm allotment. Taking the ground work ahead, the Department of Investment and Public Asset Management (Dipam) has finalized Milliman Advisors LLP India for valuing the insurance behemoth ahead of the IPO.
Online food ordering player Zomato is yet another entry in the list of interesting upcoming IPOs in 2021. Although it is yet to file draft prospectus in this regard, the company has made some executive changes keeping the public offer in mind. The offer is targeted for the first half of 2021 even as Zomato recently completed a INR4,620 crore (USD660 million) funding round ahead of the IPO.
The food tech unicorn isn’t profitable but that is unlikely to deter investors looking for business growth, grey premiums and listing gains. During FY2020, the company’s losses surged 160% to INR2,451 crore while revenues jumped 98% to INR2,485 crore.
#9 HDB Financial Services – Among the most anticipated forthcoming IPOs
HDB Financial Services – a subsidiary of HDFC Bank – is also likely to go public this year, making it fifth group company to list on stock exchanges. The nonbanking finance unit’s IPO is likely to mobilize INR10,000 crore and its parent has already hired merchant bankers for the offer. Apart from consumer loans, the company offers enterprise loans and asset financing.
The company has posted impressive performance in recent years. For the year ended 31 March 2020, HDB Financial Services posted profit of INR1,005 crore on revenues of INR10,756 crore. In comparison, its top-line stood at just INR3,302 crore in FY2016, according to annual reports on its website. Despite this high growth, HDB has managed to keep the quality of its credit profile intact. Being an HDFC-group company, HDB is likely to fetch premium valuations as well as another entry in the forthcoming IPOs in 2021.
#10 Reliance Jio
Here is another very interesting IPO name for 2021 and it could be a game changer for its parent Reliance Industries too. According to a CLSA report, the upcoming offer may be launched in 2021, although no paperwork has been filed so far. Since IPO of Jio Platforms is likely to be a massive one, it is likely to be listed in overseas markets in order to fetch higher valuations and get better visibility.
However, the listing of LIC is likely to be a landmark in several ways and it could very well attract overseas investors and prompt IPO-bound companies to look inwards. In any case, investors in Reliance Industries stand to benefit from the listing of Jio Platforms.
Since this isn’t an exhaustive list, we will see lot more interesting IPOs in 2021. Some of these interesting names not captured in the list above are Nykaa, Barbeque Nation Hospitality, ESAF Small Finance Bank, Suryoday Small Finance Bank, Laxmi Organics and Craftsman Automation. Stay tuned to IPO Central to get regular updates about these IPOs and the relevant strategy to follow to make best use of the opportunities.