EY Global IPO Trends Report shows that volatile market conditions have caused a significant slowdown in the Indian Initial Public Offering (IPO) market during the first quarter of 2022 as compared to the first quarter of 2021.
According to the EY Global IPO Trends Q1 2022 report, the Indian markets saw 16 IPOs in the first quarter of the year, compared to 23 IPOs in the first quarter of 2021.
In the January to March quarter of this year, proceeds raised through core markets equaled $995 million through three main market IPOs, while $2.57 billion was raised during Q1 2021, a 60% drop in the value of proceeds and fell 82%. number of deals.
The report attributes IPO activity to a number of factors, including geopolitical tensions, stock market volatility, price corrections in overpriced stocks, rising concerns about rising commodity and energy prices, the impact of inflation and potential interest rate hikes. The recession has been attributed to At the same time, the risk of the COVID-19 pandemic continues to hold back a full economic recovery.
Small and medium enterprise firms raised $17.46 million through 13 IPOs in Q1 2022.
In line with the sharp decline in global IPO activity, cross-border, unicorn, mega (earnings over $1 billion) and SPAC IPOs declined significantly. The report said that several IPO launches were postponed due to market uncertainty and volatility.
Sandeep Khaitan, Partner and Financial Accounting Advisory Services Leader, EY India, said: “Globally we are witnessing an inflationary environment in all western economies which has irked many investors and bankers. Policy makers are trying to figure out a suitable response to this inflationary environment, which also includes the added weight of geopolitical challenges. Companies that are planning to tap the market will have to keep an eye on such big events. After which we can see a strong uptick in IPO activity.”
A blockbuster 2021 IPO momentum has yet to materialize until 2022. The issuance and earnings are far from last year’s pace, as geopolitical uncertainty as well as other macro factors are weighing on investor sentiment. “If volatility eases and earnings are strong, then the backlog of IPOs could lead to a huge jump in volumes,” Khaitan said.
The slowdown is evident as several major IPOs are in the pipeline, but the light of day is yet to be seen. He added that once the current scenario corrects, a lot of IPOs may start hitting the markets in the next 3-6 months.
The EY report also pointed out that there is a strong pipeline for IPOs in the second quarter of 2022 and onwards. More than 20 companies have filed their draft red herring prospectus in the first quarter of 2022, planning to raise funds in the current calendar year. These include traditional companies with long track records as well as new age companies in various sectors such as consumer, pharmaceuticals, technology, logistics and financial services.
“Going forward we will see a number of commodity companies planning to raise funds through a public offering with financial services, infrastructure players and renewable energy players considering going public,” Khaitan said.
At present, all eyes are on those shares of LIC which will be listed on May 17. Analysts said it could set a precedent for many more companies planning to go public this year.
In 2021, about 60 companies raised 1.1 trillion from the markets.