Exuberant Stock Market: FY22 IPO Lineup Highest in Last 2 Decades

The buoyant stock market has sparked a rush of IPOs, with the FY22 lineup reaching the highest in the past two decades.

According to India Ratings and Research (Ind-Ra), the strong initial public offering (IPO) in FY22 in the Indian stock market bodes well for the country’s economic recovery.

In addition, entities raising equity will not have a meaningful impact on their debt levels, as the purpose of raising funds is largely related to unlocking the value proposition rather than creating new investments.

“Total issuance has reached significant levels after FY18 in terms of issuance size, with four months remaining in the fiscal year.”

According to Ind-Ra, the trend in April to November 2021 showed that the number of IPO counts for FY22 was 71, which amounts to Rs 856 billion compared to Rs 272 billion raised by 56 companies in FY21.

“Huge global liquidity resulting from the peak of fiscal and monetary expansion, strong investor interest, favorable financial market conditions and a sharp recovery in business conditions boosted the IPO market in FY22.”

“With the announcement of Life Insurance Corporation of India’s IPO issuance of Rs 1,000 billion, issuance size could exceed Rs 2,000 billion by the end of the fiscal year, a record high in terms of issuance size.”

Particularly over the last five years, the sector-by-sector trend points to the significant jump in retail IPOs.

“It includes the new-age, tech-oriented companies such as food aggregator Zomato Limited, fashion retail company Nykaa, online insurance brokerage Policy Bazaar Limited, auto advertising platform CarTrade.com and CAMS Limited.”

“The top 25 issues in the past three years have accounted for Rs 833 billion, of which the new-age, tech-oriented companies Ahave accounted for Rs 418 billion.”

The agency said the increase in issuance by new age tech-oriented companies compared to traditional companies has more to do with unlocking value and brand recognition than the need for long-term capital investment or deleveraging.

Ind-Ra believes the favorable policies, along with an Abuoyant stock market, have encouraged the start-ups to issue IPOs this year.

In March 2021, the Securities and Exchange Board of India reduced the time it takes for early stage investors to hold 25 percent of the pre-issue capital to one year from two years earlier.

“The amended regulations, which previously prohibited IPOs from making discretionary allocations, will allow them to allocate up to 60 percent of the issue size of the IPO to an eligible investor with a lock-in period. of 30 days on such shares.”

In addition, few auto parts players have also resorted to IPO issuance in FY22 after five consecutive years of absence, to fund working capital requirements and pay off loans.

“Within the healthcare sector, major problems have been taken to absorb capex business and reduce lending. The FMCG industry has also seen a consistent increase in IPO issuance over the past five years and the recent increase can be attributed to international brands such as Sapphire Foods Limited and Devyani International Limited that are planning to build a network of stores in India.”

–IANS

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(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content was automatically generated from a syndicated feed.)

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