The strong pipeline of initial public offerings (IPO) is expected to sustain capital flows even in 2022 — with the market awaiting the biggest public offer of Life Insurance Corporation of India (LIC) in the upcoming year. Around 65 Indian companies successfully raised more than Rs 1.35 lakh crore in 2021, the highest in the last three years combined, and the volumes and trend will be sustainable going forward in 2022, Kotak Mahindra Capital Company said on Tuesday. After a strong showing by digital tech companies in the primary market in 2021, the investment bank expects strong traction in the IPO pipeline for 2022 from key sectors like digital tech, consumer, FIG, healthcare, real estate, and specialty chemicals.
“The IPO momentum is likely to continue in CY22. With an IPO pipeline in place of $15 billion filed with Sebi & awaiting launch and $11 billion likely to be filed in the near term, we can expect a good share of IPO activity across mid-caps and large-caps with several high-quality companies looking to list. Fund raising activity will continue to remain buoyant from companies listed in CY20 and CY21 that may come back to raise funds, looking for growth capital, deleveraging to support growth, and specific events such as acquisitions, as the world returns to complete normalcy. Overall 2022 would be good for the Indian capital fund raising market,” said V Jayasankar, whole time director, Kotak Mahindra Capital Company.
In mergers and acquisition space, the investment bank is expecting to witness a consolidation by market leaders across product offerings and geographies in 2022 and there would be a resurgence in inbound strategic deals with foreign companies looking for opportunities in their core business areas.
Further, financial sponsors are likely to increase their participation amid a large number of exit opportunities on the table. In calendar year 2021, the M&A activity remained upbeat, surging 4% to $118 billion till November against $114 billion in 2020. Inbound majority & minority and domestic majority transactions were the key drivers during the period.
Sourav Mallik, joint managing director, Kotak Investment Banking, said: “We had a great year in terms of total M&A deals in 2021, thanks to a significant show from digital, consumer tech, and SaaS space. In 2022 we will see consolidation across product offerings and geographies and pickup in cross-border transactions.” The overall outlook for 2022 remains positive and it will turn out to be another good year.
However, investors should remain cautious and not expect all IPOs to hit the bulls eye, the company said. Globally, the tightening of US monetary policy, concerns around rising inflation, increase in interest rates, and Omicron fears — particularly in the West will be in the play in 2022. The impact on growth will be dependent on the central banks’ policy actions, the company added.