Mumbai Experts said the second half of 2022 will be another weak period for equity capital markets, especially for initial public offerings (IPOs), with volatile stock markets being one of several macroeconomic hurdles.
Total fundraising declined in equity capital markets 1.01 trillion in the first half of calendar year 2022 compared to a fundraising of 1.26 trillion over the same period last year, according to data from the primary market tracker Prime Database.
This includes fundraising in IPOs, Qualified Institutional Placements (QIPs), rights issues, InvITs, REITs and preferential allotments.
H1 2022 registered high fundraising in areas like IPO ( 40,311 crore in H1 2022 as compared to 27,418 crore in H1 2021) and preferential allotment ( 45,726 crore in H1 2022 as compared to 36,610 crore in H1 2021) one-off big deals such as . because of 21,000 crore initial share sale in and around Life Insurance Corporation of India Three Adani group companies raised Rs 15,400 crore in preferential allotment. However, there wasn’t much fundraising for most other products such as QIPs, Rights and InvITs/REITs.
Industry experts believe that while some companies will be able to tap the markets despite volatile conditions, the overall activity will remain muted, especially for IPOs.
“IPO activity will be muted. There will be more interest in relatively new areas. It is a buyer’s market and thus valuation expectations will have to be lowered, said Venkataraghavan S, managing director and head, equity capital markets, Equirus Capital.
“As far as sectors are concerned, there will be no extreme binary conditions like good-no-good in Indian IPOs. Experience from the past year indicates that investors will focus on visibility of profitability/profits apart from growth and thus tech/new age stocks can also be trending. The usual suspects like consumer and pharma will see more traction than others,” argued Venkataraghavan.
According to Abhijit Tare, MD and CEO, Motilal Oswal Investment Advisors, the IPO window for good quality companies may open after September.
“After September, I see a window of opportunity for some good IPOs to run successfully. There will be two types of IPOs, first, where we need a strong tailwind market. Second, where there will be buyers for new stories in relatively moist market conditions. We believe that at present, there are both these types of opportunities in an overall market pipeline and the second half will be more promising than the first half experience,” he said.
Products like rights issue and QIP haven’t seen much activity so far this year, but experts say there will be opportunities in both these fundraising modes in the coming months.