It’s raining IPOs in the market and pipeline for the remainder of the year is only robust. By all counts, this fiscal should see IPO fund-raise of at least $10 billion (without including mega LIC IPO) if the current trend is anything to go by, says V Jayasankar, Senior Executive Director and Head-ECM, Kotak Mahindra Capital Company (KMCC). He would know better with KMCC having managed the top three (₹10,200 crore) of the total six IPOs (₹12,423 crore) that hit market in April-June 2021. July itself is going to see IPOs worth ₹24,000 crore. Edited excerpts:
What explains this IPO rush? Is there a good pipeline and will this momentum continue?
Last fiscal was a record year for Equity Capital Market (ECM) business. Overall, ₹2.45-lakh crore was raised and about ₹25,000-30,000 crore was initial public offering (IPO) business in the country. IPO was about 15 per cent of ECM activity which was very robust.
I expect this year to be a record one for IPO market and my estimate is that in excess of $10 billion (without including the mega LIC IPO) will be raised. Even if the overall ECM activity remains similar to last year, there would be better proportion of IPOs in the equity raise.
So what is creating this shift?
There are five sectoral themes playing out in the market though the investor appetite stretched beyond them. These are the new age or consumer tech start-ups, financial services, speciality chemicals, consumer and healthcare sectors. The Indian start-up system has matured and become very robust. We see good number of listings in the coming years.
Can you elaborate on the other four trends?
We expect to see large number of well-managed companies in the financial services space to tap the market for listing across the spectrum of lending, insurance and others. A number of speciality chemical companies will continue going public as they have the scale and become more export-oriented. Also, benefiting from China plus one strategy. Similarly, there are numerous consumer and healthcare companies that we expect to go public as the addressable market has been growing.
Do you think Internet-based tech companies can garner better valuation by listing in overseas market like the US?
Indian equity markets have matured over the years and have depth of institutional investors’ participation. Investor universe is similar for well-run and well-managed tech companies, whether you list in India or abroad. You have the added advantage of Indian MFs and insurance companies participating in India listing.
The valuation peers, benchmark and methodology are similar irrespective of listing destination. Often we see institutional investors pay better value for Indian companies factoring in higher growth prospects that India may provide. You are likely to see several Indian digital and new age companies list here in the coming years reflecting the strong appetite.
Importantly, consumer brands benefit from retail participation. A successful listing can enhance the power and visibility of a brand.