PE-backed IPOs outperform non-PE backed issues: EY India

Private equity-backed IPOs have on an average outperformed non-PE backed IPOs, a new report by professional services firm EY India has revealed.

From a sectoral perspective, PE-backed IPOs in financial services have significantly outperformed the sectoral index.

This report, titled ‘PE backed IPOs-India Trend Book 2018’, provides a historical analysis of the issues made over the past five years, between 2013 and April 2018.

Financial services IPOs that were PE backed were primarily of banks and NBFCs, while the non-PE backed IPOs were of large public sector insurance companies.

Apart from financial services, consumer facing industries like food and agriculture, healthcare and pharma were more prominent among PE-backed IPOs; non-PE backed IPOs were dominated by technology and infrastructure.

Vivek Soni, Partner and National Leader Private Equity Services, EY India, said: “From a performance perspective, on an average PE-backed IPOs have outperformed non-PE backed IPOs (as well as benchmark index), compared to their offer price across time periods”.

This is not surprising in the emerging markets context, wherein the value addition brought in by PE investors comprises operational improvements, putting in place governance structures and streamlining of processes and controls to take care of the complexity that comes hand in hand with growth, he said.

Sandip Khetan, Partner and National Leader, Financial Accounting Advisory Services (FAAS), EY India, said that outlook for PE-backed IPOs remains correlated with the fortunes of the Indian capital markets.

“The medium-term outlook for PE-backed IPOs remains positive in our view,” he said.

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