Investment banks pitching for equity capital market deals are facing a much longer wait to secure mandates. What was typically a six-to-eight-month journey from the first pitch to winning a mandate can now take up to a year, as companies adopt a more cautious approach to public listings amid volatile markets, according to industry executives.
Promoters are no longer treating the appointment of investment bankers as a routine step for an initial public offering (IPO). Instead, they are taking more time to prepare businesses for public markets and identify advisers with relevant sector expertise.
A combination of volatile global markets amid macro-uncertainty and unpredictable listing-day performance has altered their behaviour. Rather than executing rapid public market debuts, issuers are expanding the scope of preliminary compliance, choosing to lengthen preparation periods in an effort to insulate valuations against a selective investor base.
"Deal timelines from the first pitch to final closure have clearly stretched," said K. Raghuram, accounting and reporting consulting partner at Uniqus Consultech.
Founded by former Big Four consultants, Uniqus helps companies in their IPO journeys—from early-stage readiness to the public listing.
"What was typically a six-to-eight month journey from conceptualization to closure is now often a 12-month process," said Raghuram, without naming his firm's active clients who are taking more time in giving mandates.
Mint has learnt that in the last six to eight months, IPO mandates of some major firms, including hospitality brands, quick commerce companies, private-equity backed financial firms and real-estate brands, were closed after longer-than-normal pitching sessions.
"Winning mandates requires a deeper structural commitment these days," said a senior Mumbai-based investment banker at a boutique firm, who wished to remain unnamed. "Till a few months ago, promoters would just rely on banks to carry an asset through to the market. Nowadays, there is a demand for particular bankers who have successfully handled specific issues before. In such cases if they don't find a banker that fits the profile, then pitches continue for months."
This banker said there are at least two pitches that have been in the market for eight to nine months and have not converted into secured mandates for this particular reason.
While extended conversion timelines are a cyclical feature of cooling equity markets, the current deceleration behaves differently than prior downturns. Historically, deal pipelines froze because promoters flatly rejected lower public valuations in banker pitches, halting the preparation process entirely until broader markets rebounded.
"Companies are using the longer window to genuinely prepare the business to operate as a listed company and comply with the regulations that come with it. That means achieving a fast, reliable financial close, strengthening internal controls and settling governance and related-party matters well before the DRHP (draft red herring prospectus) is filed," Raghuram explained. "The promoters treating this phase as preparation rather than delay are consistently seeing better listing outcomes."
Equity capital market lawyers that Mint spoke to said that pitch deck reviews that previously focused on basic compliance, corporate history and capital structures are now structured as forensic-style investigations, which end up taking more time. "Promoters are insisting on exhaustive verification across promoter and promoter group identification, material subsidiaries/joint ventures/group companies, financial indebtedness and related party transactions," said Kunal Sharma, managing partner at TARAksh Lawyers and Consultants.
However, big issues such as those of the National Stock Exchange of India Ltd and Jio Platforms Ltd remained outliers to this trend, especially since their syndicate of banks included almost every major investment banking name in the country, leaving little room for any better options. These mandates were finalized within a few weeks.
Jio and NSE have filed their offers against the backdrop of an IPO market that is quickly regaining momentum after a slowdown in the first half of the calendar year. SBI Funds Management Ltd, Zepto Ltd and Manipal Health are also expected to launch their IPOs in the coming months.
Mint had reported on 24 June that investment bankers are preparing IPO roadshows for at least five to six private equity-backed firms, including KKR-backed InCred Holdings Ltd, Everstone-backed Integris Medtech Ltd and Bain Capital-backed Dhoot Transmission Ltd.