India witnessed 22 initial public offers worth over USD 2.5 billion in the first three months of 2021 amid "high momentum" in the country's capital markets and the trend is likely to stay bullish in the current quarter also, according to a report.
Significant amount of activity is driven by huge dry powder awaiting investment and companies exploring a listing in India or overseas.
India witnessed 22 initial public offers worth over USD 2.5 billion in the first three months of 2021 amid “high momentum” in the country’s capital markets and the trend is likely to stay bullish in the current quarter also, according to a report. Leading consultancy EY India’s IPO (Initial Public Offer) report released on Wednesday showed that consumer products and retail, diversified industrial products, automotive and transportation were the most active sectors in terms of the number of IPOs in the 2021 first quarter.
The IPOs include both in the main as well as SME (Small and Medium Enterprise) markets. “With a robust Q1, IPO market likely to stay bullish in Q2 2021,” it said, adding that India ranks ninth globally in terms of the number of IPOs Year-To-Date (YTD) 2021. There were 22 IPOs that mopped up USD 2,570.44 million in the first quarter of this year, including five in the SME space.
During the first quarter, Indian Railway Finance Corp’s IPO — with an issue size of USD 634 million — was the largest. “In the main markets (BSE and NSE), there were 17 IPOs in Q1 2021 versus 1 IPO in Q1 2020 and 10 IPOs in Q4 2020, representing an increase of 1,600 per cent compared to Q1 2020 and an increase of 70 per cent compared to Q4 2020,” the report said.
In the SME segment, there were 5 IPOs in the first quarter of this year versus 11 and 9 IPOs in the first quarter of 2020 and fourth quarter of last year, respectively. This represents a decrease of 55 per cent compared to Q1 2020 and a decline of 44 per cent compared to Q4 2020. “We are witnessing high momentum in the Indian capital markets. Significant amount of activity is driven by huge dry powder awaiting investment and companies exploring a listing in India or overseas.
“The markets continue to reward companies with robust, scalable and technology-led business models,” Sandip Khetan, Partner and National Leader of Financial Accounting Advisory Services (FAAS) at EY India said. As per the report, the IPO pipeline has over 20 companies that have filed their Draft Red Herring Prospectus (DRHPs) and more than 30 PE-backed companies are planning exits. InvITs worth almost USD 5 billion are in the pipeline.
However, the report also noted that there are reasons for caution in the near-term, given the slow start to vaccinations in India relative to the size of the population, renewed spike in COVID infections with the second wave and threats from new variants of the virus. Globally, the report said that attractive market conditions in 2021 so far have resulted in the best-performing first quarter by deal numbers and proceeds in the last 20 years.
“Just as traditional IPO markets have been highly active, the Special Purpose Acquisition Company (SPAC) IPOs in Q1 have also been breaking records, completing more deals and raising more in proceeds than in the whole of 2020. “Through Q1 2021, the global IPO market saw 430 deals raising USD 105.6 bn in proceeds, increasing by 85 per cent and 271 per cent year-on-year, respectively,” it added.