India’s IPO market likely to see revival after political uncertainty ends

Photo: Mint

The thumping victory of the coalition led by Prime Minister Narendra Modi is expected to revive public market fund-raising activity such as initial public offerings (IPO) and qualified institutional placements (QIP) after three quarters of scant activity.

As of 31 March, around 59 companies with plans to raise as much as ₹53,000 crore have secured the approval of regulator Securities and Exchange Board of India to launch IPOs, according to data from primary market tracker Prime Database.

With the sweeping victory of the National Democratic Alliance (NDA) ending political uncertainty and signalling continuity of reforms, fund-raising activity that had slowed down due to stock market volatility is likely to get a boost.

“Companies have already started conversations around the launching of their respective deals. We should see good activity in the IPO market starting early July,” said Munish Aggarwal, director at Mumbai-based investment bank Equirus Capital Pvt. Ltd. “The uncertainty that people had in their minds in terms of whether we will have a stable and predictable government is no longer there.”

Only seven firms raised ₹5,033 crore through IPOs so far in 2019, compared with 24 that raised ₹30,959 crore the previous year, shows data from Prime Database. “IPO-bound companies with Sebi approval that have long kept watchful vigil for stable governance and markets will likely be the first ones to hit the market,” said Ravi Dubey, partner at law firm L&L Partners. “This will be followed by issuers refiling their DRHPs (draft red herring prospectus), seeking to quickly pass Sebi muster.”

While a significantly large number of IPOs are waiting in the wings, experts say QIP deals are likely to hit the market first, given the relatively simple regulatory regime for the product. A QIP is a capital-raising tool through which publicly traded firms can sell securities such as shares and convertible debentures to institutional buyers.

“In case of QIPs, with a more positive investor sentiment and the Sensex reaching a record high, several trades that could not be launched towards the end of last fiscal due to liquidity and other issues are likely to be powered soon,” Dubey said. “Since IPOs would take some time to traverse the regulatory road, QIPs may launch quicker.”

A similar trend was witnessed after the 2014 general election, QIPs being the first to get off the block.

However, the return to power of the NDA government does not mean every company will be able to tap the market.

“Not all companies will benefit from the change in sentiment,” Aggarwal said. “While transactions, which were stuck because investors wanted to wait to figure out how the elections will play out, will witness better do-ability, those where valuations in underlying sectors had been hit significantly will be difficult even now.”

Aggarwal added that companies from the financial services would initially tap the markets.

This article was first published on livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.