After a record fundraising in primary markets last year, 2018 turned out to be a disappointment with the last couple of quarters seeing just a handful of initial public offerings (IPOs) and qualified institutional placements (QIPs) because of several macro headwinds that played spoilsport.

In 2017, there were IPOs and QIPs worth 67,147 crore and 56,152 crore, respectively. The figure fell sharply to 30,959 crore and 16,076 crore of IPOs and QIPs this year, showed data from primary market tracker Prime Database. And while the pipeline of companies filing draft prospectus for going public has swelled significantly, with the general elections scheduled for early next year and dark clouds of volatility still hanging over the markets, 2019 is expected to be a challenging year, at least in the first six months.

“For IPOs you need good to stable market environment. However markets over the last few months have remained volatile on account of uncertainty around state elections, global trade war tensions, adverse currency movements, liquidity issues due to the IL&FS crisis and other macro level issues. When we started the year, it was well expected that the activity will be subdued than the previous year," said Jibi Jacob, head–equity capital markets at Edelweiss Financial Services Ltd.

It was clear that this year, the window of fundraising will be truncated due to assembly elections as investors generally will be risk averse, he added. While macro factors such as currency depreciation, crude oil prices and the liquidity crisis at non-banking financial companies (NBFC) threw a spanner in the plans of many companies looking to tap the primary market in 2018, investment bankers say that there have been improvements on a few fronts, which could mean that quality companies might see a window of opportunity in the first quarter of 2019.

“Due to the recent correction in crude oil prices and liquidity infusion by the RBI though OMO (open market operation), liquidity situation in the market is expected to ease," said Gaurav Sood, co-head–equity capital markets at ICICI Securities Ltd. “While there will be overhang of general elections, we believe that high-quality equity offerings should have strong investor appetite in January to March 2019 window," he said.

Foreign institutional investors (FIIs), who were net sellers of domestic equities this year, are expected to return to investing including in new issuances.

“Retail savings are being channelized in the markets through mutual funds. While FIIs have been net sellers this year, they have started looking at Indian equities positively due to the recent correction in crude oil prices and policies announced by RBI to ease the tight liquidity situation. We believe that there will be investor appetite in high quality IPOs next year," said Sood.

Jacob at Edelweiss said domestic investors flush with liquidity will continue to drive activity in the primary market.

“DIIs will continue to invest in markets and IPOs/ QIPs as they are getting record inflows in form of SIPs, etc. Today DIIs are the most dominant pool of capital. There are around 7-8 companies on roadshows meeting both FIIs and DIIs. There is enough investor appetite for differentiated and sizable players in the market," he said.

However, given the long pipeline of companies that have filed their prospectus for an initial share sale and the prevailing market conditions, some companies might have to look at alternative sources for their fundraising ambitions.

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