The country’s capital markets are expected to see heightened activity during the remaining few months of the calendar year and the first quarter of next year with many companies readying documents to hit the market.

While there is buzz in the air about the mega IPO of LIC, a number of other companies are also gearing up to hit the market.

After a sedate 2018-19 for IPOs, the activity has begun to look up in 2019-20. More than ₹25,000 crore was raised by companies through IPOs during 2019-20, mainly by some public sector undertakings (PSUs), REIT listing as well as usual equity listing by many companies.

Madhu Sudan Kankani, Partner, Deloitte, told BusinessLine, “With the growth and capital need of new sectors, the rising valuation, planned exits by several private equity houses from their old investments, as well as the disinvestment programme of the government, there was an expectation that the equity market in India would pick up significantly in 2020-21. This was also visible from the number of Draft Red Herring Prospectus (DRHP) that were being filed by companies planning to go for IPOs.”

Only 2 listings in FY20-21

Since the beginning of calendar year 2020, volatility in the equity markets, challenges faced by some sectors, including auto, financial services, telecom and hospitality had its overhang on investor confidence. However, sectors as finance, pharmaceuticals and life sciences, and new-tech, including e-commerce, are abuzz with activity.

“The Covid 19 pandemic had a serious impact on the plans of capital-raising by most companies. With the stock markets plummeting, uncertainties around business viability, business models and projections, need by investors to preserve cash and adopt a strategy of wait-and- watch, resulted in most IPOs plans getting shelved. So much so that, in FY2020-21, there have been only two listings in India. More than 40 companies had filed their DRHP in 2019-20, of which only five have been listed so far,” he said.

Higher IPO trend is is expected over the next year. Factors likely to fuel this trend include continued focus on dis-investments by the government and the need to maintain liquidity and reduce reliance on debt.

Fighting the pandemic

Maintaining capital, regulations on listing requirements for small finance banks within a particular time frame may accelerate the listing plans in the financial service sector. Several new-age tech and e-commerce companies with better valuations and have demonstrated better resiliency during the pandemic would be able to access the capital market and provide liquidity and/or exits to existing owners/private equity investors. There is growing activity around REITs and InVITs by real estate and infrastructure sectors.

The regulators are taking several steps to boost the IPO activity such as exploration and discussion around direct listing in overseas markets, extension of validity of regulatory approvals by SEBI, discussion around social stock exchange etc along with few proposed large IPO plans of government corporations.

Related Topics