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The upcoming calendar year 2021 would be another blockbuster year for initial public offerings (IPOs) with volumes expected to easily surpass ₹50,000 crore mark, top officials of Kotak Mahindra Capital Company (KMCC) said on Monday.
The fund raising through IPOs will be even higher if the much anticipated Life Insurance Corporation (LIC) IPO were to happen in 2021, they said. In calendar 2020, IPO volumes jumped a whopping 2.25 times to ₹45,000 crore, compared to ₹20,300 crore in CY2019.
“From a flow perspective, you should look at 40-50 per cent increase in number of IPO deals and from a value perspective it will be much higher than ₹45,000 crore raised this current year. At least ₹50,000 crore is achievable with an upside risk and very significant growth if LIC IPO happens,” said V Jayasankar, Senior ED & Head ECM, Kotak Mahindra Capital Company.
Top draw sectors
Technology, fast moving consumer goods, healthcare and financial services are going to be the top draw in terms of sectors where IPOs are going to come about in significant numbers. 2021 will also see good activity on the public sector front, riding on recent success in IRCTC offer for sale and good appetite for Canara Bank’s qualified institutional placement.
“Given the momentum we have seen so far in second half of the current calendar year and with listing gains having been significant, we are seeing lot of companies accelerate discussions around IPOs. Some companies whose DRHP were withdrawn or lapsed are now even thinking of reentering the IPO market,” Jayasankar said.
KMCC should know the IPO pipeline trend better as its investment banking unit had led 15 out of the 20 primary market issuances over ₹1,000 crore in calendar year 2020 and helped India Inc raise ₹1.42 lakh crore during the pandemic.
i-bankers on song
The massive surge in IPOs, highest in the last five years, has been the main reason for the rise in Equity Capital Markets (ECM) investment banking fee pool. Since calendar year 2018, the ECM IB fee share pool has doubled from 18 per cent to 37 per cent.
In calendar year 2020, till date, the average Indian investment banking fee pool on an average jumped 30 per cent to $800-900 million from $600-700 million in calendar year 2019.
Of the $800-900 million of the fee pool, ECM accounted for 37 per cent of the total fee pool followed by private equity that accounted for close to 37 per cent of the fee pool, all thanks to the Reliance Jio and Reliance Retail deals. My& A accounted for 26 per cent of the total IB fee pool.
S Ramesh, MD& CEO, KMCC said that the deal appetite has remained strong despite the pandemic. “Easy and ample liquidity across the globe has been one of the key factors for driving deal making.
We expect investors to continue to back winners in the post-Covid world and therefore outlook for Investment Banking will continue to remain strong.
On back of a resilient equity market and vibrant M&A environment we expect the IB fee pool in the next 12 to 24 months to get closer to $1 billion”
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