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Explained in 8 charts: India’s record IPO boom in 2021


NEW DELHI: It’s IPOs ahoy for domestic stock markets as India is poised to emerge as one of the top initial public offer (IPO) destinations in terms of proceeds, a report by consultancy firm Ernst & Young (EY) showed. With investors largely displaying a bullish sentiment, companies mopped up a whopping $9.7 billion through initial share sales in the first 9 months of 2021, This is the highest amount that companies have incurred via IPO proceeds for the 9-month period in two decades. However, if we compare this with proceeds raised by global stock markets, the amount is just around 3 per cent of the total funds raised during the same period. Globally, there were 1,635 IPOs in the first 8 months of this year. Indices rank 12th in no. of IPOs globallyEven though the stock markets are witnessing an upsurge in the number of companies opting to go public for raising funds, the domestic indices rank 12th in the world in terms of no. of IPOs in the last 1 year. Seven IPOs were launched in the second quarter of the current fiscal and 17 came in the first quarter. In the SME market segment itself there were 11 companies which made their market debut on the bourses in July-September period. This represents an increase of 175 per cent as compared to the same quarter last year. In total, 72 IPOs hit the stock market during the January-September period this year in India. US tops IPO proceedsThe report showed that the US topped the list in terms of IPO proceeds at stock exchanges Nasdaq and NYSE, followed by China’s Shanghai, and Hong Kong. Others in the list are Shenzhen (SZSE and Chinext), London (Main and AIM), Euronext and Alternext, Korea (KRX and KOSDAQ), Sao Paulo (BM&F BOVESPA), Deutsche Borse (Main and Scale), NSE and BSE, NASDAQ OMX and First North. IPO index soared over 100% The boom in IPO market can be clearly seen in the fact that a gauge of firms that listed in the last 2 years has outperformed the Nifty 50 index. The S&P BSE IPO index is at its all-time high and has given returns worth 103.12 per cent to the investors in the year so far. The markets are majorly witnessing a boom in tech start-ups that cater to the internet market. Sebi has recently made it more appealing for such firms to list their shares in the domestic indices. Together, the tech start-ups have raised $8.8 billion in local IPOs so far in 2021. The pipeline for the rest of the year includes digital-payments service Paytm and beauty products e-commerce site Nykaa. ‘2021 could be India’s year of IPOs’In its State of the Indian Economy report for the month of August, the Reserve Bank of India (RBI) said that 2021 could turn out to be India’s year of IPOs. Debut offerings by unicorns – unlisted start-ups – kicked off by a Zomato’s stellar IPO that was oversubscribed 38 times, have set domestic stock markets on fire and global investors in a frenzy. Following in its wake, the $ 2.2 billion proposed listing by Paytm symbolises investor excitement surrounding India’s digitisation – digital payment solutions; e-commerce; logistics. RBI said that India’s tech boom has been long awaited, with strong global and domestic appetite for what are widely believed to be world class businesses in the pipeline. These listings coincide with a broader rush by companies to tap the market and the fomo (fear of missing out) factor driving investors, which have taken the benchmark indices to records. RBI estimates India to have 100 unicorns in the country, with 10 new ones created in 2019, 13 in 2020 in spite of the pandemic. Over 40 companies in pipeline The report further notes that there are over 40 companies that have filed their draft red herring prospectus (DRHP) in line to make their market debut soon. Most of these have been filed by companies in technology, healthcare, consumer products and retail sector. The IPO by Sona BLW Precision Forgings was the largest in terms of issue size in Q2 of FY22, the EY report said. Out of these, as many as 30 companies are looking to launch their IPOs in the October-November period. Collectively, all these companies are expected to raise over Rs 45,000 crore, news agency PTI reported quoting sources. The successful IPO of food delivery company Zomato, which was overwhelmingly subscribed by over 38 times, encouraged new-age tech companies to come out with their primary share-sales. Policybazaar (Rs 6,017 crore), Emcure Pharmaceuticals (Rs 4,500 crore) Nykaa (Rs 4,000 crore), CMS Info Systems (Rs 2,000 crore), MobiKwik Systems (Rs 1,900 crore) are some of the companies that are expected to go public in the next two months. Till September, as many as 40 companies have floated their IPOs to raise Rs 64,217 crore. Trend set by Unicorn companies India has added almost 3 unicorns per month so far this year. This has nearly doubled the total no. of unicorn companies in the country to 51 as of August end, a report by Hurun India showed. Technology companies have led the rally by raising about Rs 15,000 crore through IPOs in the last 18 months. Further, IPOs worth Rs 30,000 crore by such firms are in the pipeline. The trend is not just for Indian markets but world over, technology companies have been the most active in terms of raising funds from the market. “Growing number of unicorns in the startup ecosystem is a testimony of the new-age tech companies coming of age in our economy. These companies often follow a unique business model focusing more on rapid growth than immediate profitability,” Sebi chairman Ajay Tyagi had said. Investors eye ‘mother of all IPOs’The IPO by Life Insurance Corporation (LIC) of India is touted to be the biggest one ever, with a value close to Rs 7,000-8,000 crore. According to a report in Business Standard, the government is eyeing a valuation of Rs 10 lakh crore for LIC IPO. The government is expected to sell a 5-10 per cent stake in LIC in what could be India’s biggest listing. The company has long been considered a strategic asset, commanding more than 60 per cent of India’s life insurance market with Rs 36 lakh crore of assets under management. LIC’s listing is crucial for the government in meeting its disinvestment target of Rs 1.75 lakh crore for 2021-22 (April-March). So far in the current fiscal, Rs 9,110 crore has been mopped up through minority stake sales in PSU and sale of SUUTI stake in Axis Bank. It will receive another Rs 2,700 crore from Air India sale. What makes the IPO even more attractive is that the government is planning to split the share issue into two consecutive offerings with a gap of a few months. With the biggest issue size the market has seen so far, it’s believed that it may not have the capacity to absorb the entire issue in one go. The Centre plans to list the insurance behemoth within the current financial year ending March 2022. Global rebound The EY report also noted that a key driver of activity in the third quarter of 2021 was the rebound of IPO markets in Europe, Middle East, India and Africa (EMEIA), particularly Europe, India and Tel Aviv exchanges. In Q3 alone, 18 per cent more deals than the previous third quarter record set in 2007 and 11 per cent higher proceeds than the last record-setting third quarter in 2020 are expected. Sensex, Nifty at their best performance in 2 years Reflecting strong investor sentiments in recent months, the 30-share sensex has been scaling new peaks and touched an all-time high of 60,737 points during intra-day trade on October 13. The benchmark index crossed the 60,000-mark for the first time on September 24. The broader NSE Nifty too has been scaling record highs. It breached the 18,000-mark on October 11 and is currently hovering around that level.


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