India a rare bright spot amid slump in global IPO activity
Globally, number of IPOs in 2016 fell 16% and capital raised was down 33%, while India recorded a 38% increase in deal volume and 79% surge in proceeds raised
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Mumbai: Even as global initial public offering (IPO) activity witnessed a fall in both volume and value terms in 2016, India was a standout performer, according to consulting firm EY’s Global IPO Trends report.
Globally, the number of IPOs in 2016 fell 16% year-on-year to 1,055 and capital raised was down 33% to $132.5 billion, the report said, adding that heightened political and economic uncertainty had affected activity in the IPO market.
However, India recorded a 38% increase in deal volume and a 79% surge in proceeds raised, driven by stronger economic fundamentals and a pro-business political regime.
On Indian stock exchanges, 83 IPOs raised $3.8 billion (approximately Rs25,800 crore) in 2016, according to the EY report.
India’s stock markets ranked as the seventh most active in terms of number of deals globally as the country’s IPO activity hit a six-year high.
The year saw several major issues such as the Rs6,057 crore IPO of ICICI Prudential Life Insurance Co. Ltd, the Rs2,500 crore IPO of PNB Housing Finance Ltd, the Rs2,176 crore IPO of small finance bank licensee Equitas Holdings Ltd and the Rs1,330 crore share sale of pharmaceutical firm Laurus Labs Ltd.
“Continuing regulatory reforms and positive investment climate has helped India dominate in terms of number of deals. Continuous changes in investment climate in India and further policy improvements like implementation of GST (goods and services tax) could fuel even more demand, resulting in need for equity and more action in the IPO marketplace,” said Pankaj Chadha, a partner at an Indian member firm of EY Global.
India is likely to remain the highlight of IPO activity in 2017, the report said.
“With a supportive political backdrop, upbeat economic sentiment, improved business confidence, easing inflationary pressure and stable foreign direct investment inflows, India has an impressive pipeline of IPOs for 2017,” it said, adding that emerging sectors such as renewable energy are expected to add to India IPO activity next year.
“While technology, industrials and healthcare are the top three sectors trending globally, new-generation sectors like renewable energy are likely to show higher activity in India in addition to the traditional banking, insurance and consumer goods sectors,” said Vish Dhingra, executive a director at an Indian member firm of EY Global.
In September, Mint had reported that renewable energy firm Mytrah Energy India Pvt. Ltd had hired investment banks to prepare for a $250-300 million IPO. In May, ReNew Power Ventures Pvt. Ltd, the green energy producer backed by Goldman Sachs Group Inc., had initiated discussions with investment banks for an IPO.
The government’s plans to revive strategic public sector disinvestment may further add to market activity in India, added Dhingra.
Cochin Shipyard Ltd, the state-owned company building India’s first indigenously built aircraft carrier, has hired a consortium of investment banks and is working on an initial public offering that will see the government dilute a 10% stake in the company, Mint reported in September.
Another government firm, plane maker Hindustan Aeronautics Ltd, has also been reported to be preparing for an IPO.