India’s GDP development in the course of the COVID-19 hit yr of 2020 contracted drastically as a nationwide lockdown introduced financial exercise to a standstill. During the lockdown interval, shares plunged, and the Indian inventory markets (markets) took a heavy beating primarily because of the uncertainty of the unfold of the virus. Naturally, the fairness fund raised particularly by means of Initial Public Offering (IPO) was very tepid then.
Even extra shocking than the drastic fall throughout February to April 2020 was the best way the market rebounded since the previous few months of 2020 after which 2021. The authorities pumped in cash (vide numerous financial & fiscal measures) within the financial system to tide over the impression of the pandemic and a number of the cash discovered its means into monetary markets, offering excessive liquidity. Further, world liquidity offered extra funds that too received invested within the markets. Also, as with every market, when it rises, numerous retail cash will get invested additional elevating the indices and that’s how the Sensex and Nifty rolled up and breached the 60k (in September’21) and 18K (in October’21) respectively. The bull pattern available in the market with liquidity all-around has resulted in a slew of fairness raises. The excessive market indices offered a possibility to lift funds by means of IPO at enticing valuations.
The Reserve Bank of India in its Indian Economy Report had talked about that 2021 could possibly be India’s yr of IPOs and that prediction got here true. In 2021, greater than INR 1.30 Lac crores had been raised by means of 72 odd IPOs (excluding IPOs for SMEs which is roughly INR 700 crores) which is the very best quantity that firms have raised by way of IPO proceeds within the 20 years. In phrases of numbers, 17 IPOs had been launched in Q12021 (together with Indian Railways, Brookfield India REIT, Kalyan Jewellers, Nazara applied sciences and many others.), 7 in Q22021 (together with POWERGRID InvIT, GR Infraprojects and many others.), ~27 in Q32021 (Zomato, Glenmark, CarTrade, Paras) Defense & Space Technologies) and ~21 in Q42021 (which incorporates FSN E-Commerce, Fino Payments, One 97 Communications ie, Paytm).
Some IPOs equivalent to Zomato, Nykaa and many others. gave retail shareholders a possibility to spend money on the brand new age tech / digital unicorns which had been earlier accessible solely with PE/VC funds. Also, of all of the IPOs thus far, greater than 70% of IPO firms have proven a rise in share worth vs problem worth which is actually good for the buyers.
While 2021 was a ground-breaking yr when it comes to IPOs, we look ahead to 2022 with cautious optimism. Equity markets in India have been very uneven and are fluctuating considerably over the previous few weeks. The Bank of England was the primary main central financial institution to hike its rates of interest because the starting of the pandemic and the US Fed is seen to be taking a hawkish stand. This is sure to have an effect on the markets adversely. Further, identical to wave 2 of the pandemic which didn’t have an effect on the markets as such, we hope Omicron has an equally tepid impact.
Also, we hope any hostile results of rate of interest hikes are negated by a rise within the earnings of the businesses. While markets could proceed to remain uneven for a while, there’s an attention-grabbing line-up of IPOs which is already slated. The estimates and reviews state that there are 38 odd IPOs within the pipeline for the yr 2022 to make their market debut. Of all, the IPO by state-owned Life Insurance Company is predicted to be the most important with a valuation of INR 10 lac crores. Further, cab aggregator Ola, on-line training Byju’s (if US SPAC doesn’t undergo for any cause), logistics firm Delhivery, OYO rooms and many others. are additionally exploring IPOs in 2022. Apart from the above, a number of different huge names are additionally anticipated to climb the IPO ladder. Assuming there are not any huge hostile occasions, we imagine the yr 2022 may even be equally enticing for IPOs particularly for good firms who worth their IPOs properly.
(By Samir Sheth, Partner & Head at Deal Advisory Services; and Poonam Shah, Consultant at M&A Tax and Regulatory, Deal Advisory Services, BDO India)