“In Q1 2022, the Indian market introduced 16 IPOs vs 23 IPOs in Q1 2021, according to the EY Global IPO Trends Q1 2022,” the firm said.
In the previous calendar year, fundraising through initial public offerings surged to a record high, with data showing that 63 companies floated initial share sales, raising Rs 1.19 lakh crore from public investors.
The abrupt reversal in the current year is owing to a host of issues, both emerging and residual, EY said, listing out rising geopolitical tensions, stock market volatility; price correction in overvalued stocks from recent IPOs and growing concerns about a rise in the commodity and energy prices.
The firm also flagged the impact of inflation and potential interest rate hikes; as well as the COVID-19 pandemic risk continuing to hold back full economic recovery.
After delivering returns of nearly 20 per cent in the previous financial year, the BSE Sensex have both given up close to 10 per cent so far in the current financial year as inflationary risks have heightened following a surge in global commodity prices due to the Ukraine war.
A mixed picture on corporate earnings so far and aggressive monetary tightening plans both home and abroad, have also weighed on domestic stock prices.
According to EY India, the three largest IPOs in terms of proceeds so far this year were
, and , with consumer and; retail being the most active sector followed by the diversified industrial products.
“The IPO momentum of a blockbuster 2021 has not carried over to 2022 so far. Issuance and proceeds are well off last year’s pace, as geopolitical uncertainty along with other macro factors continues to affect investor sentiment,” Sandip Khetan, Partner and Financial Accounting Advisory Services Leader, EY India, said.
“That said, we are witnessing the largest IPO (of LIC) in Indian capital markets and the successful closure of other recent IPOs. The backlog of IPOs could lead to a strong upswing in volumes if volatility does moderate and earnings are robust.”
The firm highlighted a strong IPO pipeline for the current quarter and beyond, with more than 20 companies having filed draft red herring prospectus forms with the SEBI in the first quarter of 2022.
The companies looking to tap the market include traditional companies with long track records as well as newer ager companies across various sectors such as consumer, pharmaceuticals, technology, logistics and financial services, EY India said.
“In line with the sharp decline in global IPO activity, there was a considerable fall in cross- border, unicorn, mega (proceeds above USD1b) and SPAC (Special Purpose Acquisition Company) IPOs. There were also several IPO launches postponed due to market uncertainty and instability.”
According to EY India, more than 10 companies gained Unicorn status in the first quarter of the current calendar year. Unicorn companies are start-ups valued at more than USD 1 billion.
From a broader perspective, EY India said that its findings suggest robust activity in the private market.
“PE/VC investments in 2022 continue good momentum, with Jan-Feb 2022 investments (USD 10.3 bilion) being more than twice that of Jan-Feb 2021 (USD 4.1 billion) but 7.6 per cent lesser than the previous two-month period Nov-Dec 2021.”
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