The Indian primary market has been one of the busiest in the world this year, with 10 mainboard IPOs and 70 SME IPOs, according to a recent report by Ernst & Young.
"Indian stock exchanges (BSE and NSE, including SMEs) have ranked first in the world in terms of the number of IPOs and eighth in terms of issue proceeds during the year to date 2023, with no cross-border deals recorded," the report stated.
In the April-June quarter of 2023, there were six mainboard IPOs, which is 57% more than the same quarter in 2022 and 50% more than the first quarter of this year.
With 32 IPOs in Q2 of 2023, the phenomenal growth of SME IPOs persisted, increasing by 75% compared to only 18 in Q2 of 2022, and decreasing by 16% sequentially.
With two IPOs in the second quarter of 2023, the hospitality & construction sector led the major markets. Based on Year-to-Date figures for 2023, the automotive & transportation, diverse industrial products, and real estate markets each saw two IPOs.
Foreign institutional investors (FIIs) have sustained inflows into India since April 2023, culminating in an 8% market rally.
In contrast, more than 600 IPOs have raised approximately $60 billion so far in 2023, a decline of 5% by volume and 36% by value year over year. These results continue to reflect weaker global economic growth, tighter monetary policies, and heightened geopolitical tensions. High interest rates and dismal post-IPO stock performance have also prompted investors to seek out alternative asset classes, according to E&Y.
In the second quarter of 2023, thirteen companies filed their Draught Red Herring Prospectuses (DRHPs), thereby adding to the pipeline and potentially increasing activity in the primary markets.
"In the future months, it is anticipated that the Indian IPO market, including both the primary and SME segments, will experience significant growth. India must continue to concentrate on enhancing regulatory frameworks, enhancing corporate governance practises, and promoting investor education, according to Adarsh Ranka, partner and network firm leader for financial accounting advisory services at EY Global.
However, fewer PE-backed companies have pursued market debuts this year, and traditional companies are outperforming new-age companies on the public markets, according to an E&Y report.
Changes in pricing of the issue, disclosure of Key Performance Indicators (KPIs), introduction of pre-filing of draught offer documents (confidential filing), establishment of the Social Stock Exchange, and more were implemented by the Indian markets regulator SEBI in order to increase the capital markets' transparency and practises.
"The recent amendments introduced by SEBI demonstrate the organization's commitment to improving market transparency and governance. These modifications provide a solid foundation for future IPO activity and empower companies to align with best practises, bolstering investor confidence in the Indian capital markets, according to Veenit Surana, partner at EY India.
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