IPO market sees greenshoots, but revival unlikely until elections

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Updated: March 12, 2019 7:26:29 PM

State-run e-auction company MSTC Ltd also opens its IPO for subscription on Wednesday.

IPO market, REIT, Bullero Capital, equity markets, Stock exchange data, NSE indexState-run e-auction company MSTC Ltd also opens its IPO for subscription on Wednesday.

Indian firms are returning to equity markets to raise funds with two companies opening subscriptions for initial public offerings (IPOs) this month, but sentiment is expected to remain cautious ahead of national elections starting in April. While investor sentiment for Indian equities has picked up amid renewed hopes for a second term for Prime Minister Narendra Modi’s government, analysts expect the primary market for equity issues to only gather pace after election results.

“When the outcome of the elections is clear and if the global scenario keeps improving, then we should have a good year for IPOs,” said Varun Khandelwal, managing director of asset management firm Bullero Capital, noting foreign investors are returning to Indian stock markets. Embassy Office Parks REIT’s IPO consisting of a fresh issue worth up to 52.50 billion rupees ($754.15 million), India’s first real estate investment trust listing, will open on March 18, the company said on Tuesday.

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State-run e-auction company MSTC Ltd also opens its IPO for subscription on Wednesday. Stock exchange data showed net foreign portfolio inflows into Indian equities hit a 15-month high of $2.42 billion in February, a big swing from 2018’s net outflows of $4.4 billion.

“Liquidity is more important for IPOs and there should be a hunger for absorbing the papers and I think that has come back. I see a few IPOs coming to the market in the next few months, not immediately but maybe post elections,” said A.K. Prabhakar, head of research at IDBI Capital.

About 900 million eligible citizens will vote in a seven-stage general election, that will culminate with the counting of votes on May 23. The appetite for IPOs in India had slowed in 2018, following a record $11 billion IPO fundraising in 2017.

The NSE index has risen 4 percent so far in 2019, higher than its gain of 3.2 percent in 2018. Market sentiment was hit after a series of defaults at a major non-banking financial company in September last year, squeezing out banking system liquidity and making it difficult for companies to step in with primary issuance.

At least two companies modified their plans to list amid weak market conditions. Only two companies have debuted on the National Stock Exchange so far in 2019 – Chalet Hotels and Xelpmoc Design and Tech Ltd, according to the NSE website.

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