By Lav Chaturvedi
Despite the challenges of the Coronavirus pandemic, the oncoming economic year 2021-22 is most likely to be an overwhelming year as soon as once again for Initial Public Offerings (IPOs). A quantity of aspects will contribute to the likelihood of the present year becoming favourable for key market place fund-raising.
Growing retail interest
The fast improve in retail investor numbers, even through the period of intense volatility, was a main driving force for the markets in the previous year. There was a record addition of more than 1 core new demat accounts in 2020 and by January 2021, new investor accounts reached a record 5 crore. The increasing interest of retail investors along with an enhanced want for businesses to tap the markets for raising capital, had infused a sturdy momentum in the IPO markets final year, which will also spill more than to this year.
Last year was a hit
Between April and January of the economic year 2020-21, at least 34 businesses went public, raising more than Rs 21,000 crores from IPOs, even as COVID-19 pandemic dampened market place sentiments in the starting of the fiscal.
According to Prime Database figures quoted in public forums, the all round key market place IPOs received a excellent response from investors. The public lapped up each tiny and large players who created a debut final year. The IRCTC stock was oversubscribed by 109 instances and SBI Cards by 19 instances, Ujjivan Small Finance Bank was lapped up more than one hundred instances, CSB Bank by 48 instances, Affle by 48 instances, Polycab by 36 instances, Neogen Chemicals by 29 instances and Indiamart Intermesh by 20 instances. Besides these, at least 8 IPOs have been subscribed more than 10 instances, 1 other IPO was oversubscribed by more than 3 instances and balance 4 IPOs have been oversubscribed by 13 instances, as per Prime database numbers.
Continued momentum
The positive momentum for IPOs witnessed more than the previous year is set to be carried forward in this economic year as effectively, as more businesses would tap the key market place to raise funds in the post-pandemic recovery phase. A whopping Rs 41,863.24 crore is most likely to be raised this year. Out of this, the businesses that currently have SEBI’s approval for their IPOs would raise Rs 19,146.24 crore, and businesses awaiting SEBI’s approval are most likely to raise Rs 22,717 crore. Kalyan Jewellers, NCDEX, RailTel, Aditya Birla Mutual Fund, Zomato, NSE and IRFC are amongst the prominent IPOs of 2021.
Abundant liquidity and reduced expense of funding
The interest price situation remained abysmally low in 2020-21, along with abundant liquidity in the technique created economic institutions present IPO funding goods at reduced and affordable prices. Going forward, as the interest price situation is anticipated to stay favourable in 2021-22, IPOs are anticipated to get continued assistance from reduced expense of funding.
PSU divestments
In Union Budget, Finance Minister Smt. Nirmala Sitharaman had announced mega disinvestment plans for two public sector banks and one basic insurance coverage firm this year. She had stated that LIC public listing will be completed in 2021-22. In our view, thriving divestment of these PSUs is very essential for the government to attain its divestment target of Rs 1.75 lakh crore in 2021-22. These blockbuster listings could potentially help in sustaining present buoyancy in the IPO market place 2021-22.
Increased participation from foreign investors
Huge fiscal stimulus announced by the USA and European nations in 2020 resulted in big liquidity sloshing to domestic equities. With India displaying sturdy resilience against Covid-19 outbreak and improvement of important financial indicators month-right after-month from June’20 onwards, Foreign investors’ faith renewed about domestic markets. Resultantly, FPIs invested ~US$24bn in Indian equities in 2020, which is the highest ever at least in the final 20 calendar years. As India continues to present a promising development outlook globally, we think FPIs flow to Indian equities need to stay favourable in 2021-22.
To conclude
India is anticipated to witness a sharp uptick in capital expenditures in 2021-22 from the central government and choose significant states, which will surely lead to improvement in capacity utilization of a number of industries and thereby triggering want for capacity expansion. Additionally, a quantity of reform measures undertaken by the government which includes PLI schemes to stimulate investment activities in the nation are most likely to outcome in a larger capital requirement for corporates. Hence, a significant quantity of businesses surely will look forward to fundraising via the IPO route.
(Lav Chaturvedi is ED & CEO at Reliance Securities. Views expressed are the author’s personal.)