‘InvITs, REITs issuance to increase as investors look for steady income’

The market has already seen a couple of high-quality IPOs such as Mankind and Nexus REIT, which have had a strong opening when they listed. Domestic and foreign investors have been very active in the IPOs, numerous secondary market offerings and OFS transactions. The current IPO pipeline has a bias towards small-to-mid sized deals (₹500-2,000 crore) and some of these would hit the markets in the first half of this fiscal. If IPOs continue to perform well, we can expect some larger issuances towards the end of this year. After the all-time highs of fund raising in FY22, the IPO market saw a dip of over 60 per cent in FY23, on account of weak performance of some of the listings and a significant risk aversion from foreign investors. The investor sentiment has definitely changed for the better this fiscal, but we expect them to be very discerning and careful in their investment decisions. Only those companies with good quality and reasonable pricing can expect acceptance in the IPO market.

There are about 50 issuers who have received SEBI approval, but are yet to launch their IPOs. Almost 70 per cent of these have received their approval in 2022. In a lot of such cases, companies and bankers would have attempted to build demand in the IPOs, but may have encountered mismatch on pricing or generated inadequate demand. With a more positive IPO environment, we expect some of the companies to test out investor interest again, including revision of pricing in some cases. Usually, once an equilibrium on pricing and adequate demand is established, bankers will guide issuers to go ahead with listing. Companies are assessing the right market conditions for launch and also re-balancing pricing expectations to reflect investor sentiment. Again, we do expect investors to be selective and to focus on quality issuers at attractive price.

Markets are trading near all-time highs. We see significant divergence in valuations of leaders versus lower market share players across sectors. There is a clear bias towards quality companies, with proven business models, strong governance standards and a track record over multiple quarters (if not years). Valuations of such sector leaders remain elevated, and yet investor preferences still centre around these leaders.

We have built our investment banking franchise on the back of strong sectoral practices, coupled with a wide product basket across ECM, M&A, private equity and structured finance solutions. Over the last three years, we have had strong market share across Specialty Chemicals, Auto & Auto Ancillaries, Real Estate, REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts). We see a lot of opportunity in Enterprise Tech, where we have already worked for players such as Route Mobile, MapmyIndia and Latent View. We also hope to build on our consumer franchise, where we have worked for Metro, Manyavar, Medplus, Bikaji, among others.

M&A activity in India is expected to remain elevated. We are seeing a number of Indian entrepreneurs build out businesses and eventually monetise. Private equity firms have emerged as prominent buyers, as many of them are going beyond their traditional minority growth capital focus, to take full control positions. They actively buy into growing businesses, help them scale up rapidly, and eventually sell them. At Axis Capital, we have built a strong financial sponsors (private equity) practice, having established relationships with most key private equity investors in the country.

At Axis Capital, we have not worked on strategic sale transactions for the government recently. But we have actively participated in capital market-linked disinvestment activities including Coal India, LIC, Mazagon Dock and IRCTC. InvITs is another emerging asset monetisation mechanism, where the government already has had good initial success through the Iisted InvITs of Powergrid and NHAI. We expect the government to continue to use the capital markets route for disinvestment.

Yes, we anticipate good growth in the InvITs and REITs market in India. We have the largest market share in InvIT and REIT issuances in India, spread across multiple InvITs (in roads, transmission, renewables) and REITs (commercial and retail malls). We have observed a strong interest from investors, including sovereign wealth funds, family offices, AIFs (alternative investment funds), and institutions, who seek stable and predictable cash-generation assets in an uncertain global market.

The developed economies, led by the US, have already gone through a steep upward movement in interest rates, which may not be the case going ahead. While the western world does face challenges to economic growth, Indian economy continues to be one of the most attractive markets for global capital. Sovereign funds, FIIs continue to find excellent opportunities both in stable, well-built cash generating assets (through the REIT/InvIT route) and in high-growth oriented companies through public listed equity in sectors such as manufacturing, defence, chemicals, consumer, etc. We, therefore, expect foreign institutional capital to remain positively biased towards India.