Mumbai : The initial public offering (IPO) is lacking after a storm last year. Consolidation over the past few months has made it difficult for companies looking to tap the capital markets to raise funds. As a result, there has been a dearth of IPOs for over a month. This is the longest dry spell since May 2021, the only month in last year’s IPO boom when no public issue hit the primary markets.
The calm phase is mainly due to intense geopolitical tensions, rising inflation concerns and global growth concerns, which have rocked equity markets.
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No new IPO is visible. However, whether this phase could be longer than the lockdown-induced lacuna of the June 2020 quarter depends on when the markets return to stability. IPO pipeline still strong because it’s worth the issues 1.06 trillion has already got regulatory approval. However, companies are hesitant to launch IPOs in this nervous market.
“As things stand at present, the market volatility shows no signs of easing and the overall mood is also bearish,” said Pranav Haldia, Managing Director, Prime Database Group. “In such markets, usually and historically, companies do not prefer to launch their IPOs,” Haldia said.
Both retail and institutional investors stormed the primary markets soon after the crash caused by the pandemic. As a result, IPO fundraising reached a record 1.2 trillion in 2021. However, enthusiasm is waning since early 2022, although some heavy lifting has been done by the biggest public issue, the Life Insurance Corporation of India.
Nevertheless, the public equity fundraising scenario is not entirely gloomy as the June quarter saw 10 public issues as compared to six in the corresponding period of the previous fiscal.
“It has been a month or two now that no IPO activity has been seen. “We do not believe that the IPO market has dried up completely,” said Prashant Rao, director and head, equity capital markets, Anand Rathi Investment Banking. That being said, it is a challenging time and companies with approvals in hand are waiting for the right window of opportunity to launch,” he said.
Meanwhile, corporate fundraising is looking challenging against a backdrop of highly volatile stock markets and rising interest rates.
“There have been some market challenges as well as some performance pressures with companies launching IPOs recently. Therefore, some investors are wary of new IPO opportunities. Many companies are already in talks for alternative sources of financing by the time the IPO market opens up.”
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