Fundraising via IPOs declines 60% in January-March this year
Activity in the primary market witnessed a significant slowdown between January and March this year for a variety of reasons, ranging from volatility in global markets to rate action by central banks across the world.
EY, in its global IPO trends report on Monday, said the country saw only 16 Indian IPOs in Q12022 against 23 IPOs in Q12021, resulting in a decline of 60% in terms of proceeds raised through offers and of 82% in the number of deals.
During the first three months this year, proceeds raised through the main markets equated to $995 million via three main market IPOs, compared to $2.57 billion during the same period last year. The three largest IPOs till March in terms of proceeds were Adani Wilmar, Vedant Fashions and AGS Transact Technologies, with consumer products and retail being the most active sector, followed by the diversified industrial products. The SME segment raised $17.46 million via 13 IPOs during Q1 this year.
Martin Steinbach, EMEIA IPO Leader, EY, said, “The current geopolitical tensions and widespread uncertainty in many EMEIA (Europe, Middle East, India, Africa) equity markets are forcing IPO dealmakers to look at alternative options or to consider delaying their IPO until calmer waters arise. We have already seen a number of IPO postponements in the short-term which has resulted in a quiet first quarter of this year.”
However, EY believes there is a strong pipeline for IPOs later this year. More than 20 companies have filed offer documents in Q1 of the ongoing calendar year. The list is a mix of traditional companies with long track records and new-age companies across consumer, pharmaceuticals, technology, logistics and financial services sectors.
The Securities and Exchange Board of India, meanwhile, has made several amendments like change in disclosures for objects of the issue, revised norms for credit rating agencies (monitoring proceeds), and revised norms for price band (wherein now 5% cap is to be maintained between the floor price and upper price).
After several loss-making companies commanded lofty valuations and eroded investor wealth, the regulator has issued a consultation paper on basis of issue price, seeking disclosure of ‘key performed indicators’, particularly from loss-making companies.
EY expects robust activity in the private market, with more than 10 companies gaining the unicorn status in Q12022. “PE/VC investments in 2022 continue good momentum, with Jan-Feb 2022 investments ($10.3 bn) being more than twice that of Jan-Feb 2021 (US$4.1 bn), but 7.6% less than the previous two-month period Nov-Dec 2021,” the report said.