The pace has slowed down ever since. Will we see companies going for IPOs anytime soon? Is this the right time to invest in IPOs? We’ll try to answer all your questions in this article.
Before jumping into any statistics, let’s discuss what the macroeconomic situation has been over the last 10 months. The economy has witnessed a roller coaster ride of events, from the Russia-Ukraine War to skyrocketing inflation, markets have seen it all. High commodity prices have hit companies’ margins all over the world.
Central banks around the globe have been increasing interest rates to curb inflation. Such news has impacted the markets negatively. While everyone around us is hearing big negative words like recession and hyperinflation, there is still a ray of hope.
Let’s have a look at India now. Market indices have been through high volatility. FPIs, a major factor contributing to movements in the markets, withdrew above Rs. 2 lakh crores between January to June this year, mainly due to a hike in interest rates.
But there is an interesting insight here. Though there has been a high outflow of funds by FIIs, DIIs inflows on the other side remained competitive.
Can we conclude that gone are the days when Indian markets used to be highly impacted by FPI activities? Maybe.
Another interesting thing is that the average Demat accounts being opened in India monthly has reached to a whopping 3 million. This very well reflects the retail investors’ enthusiasm and confidence in the market.
Indian retail was underpenetrated till now and it still is to some extent. But the above data reflects the increased appetite of investors. SIP inflows have surged to almost 15,000 crores per month, according to the latest data released by the Association of Mutual Funds in India.
Healthy growth in such indicators coupled with international organizations like IMF predicting the highest GDP growth for India amongst the large economies augurs well for the national economy.
Amidst this, it would be great if we have a look at primary markets too to get a better understanding of the current economic situation.
Primary market activities saw a halt this year, mainly due to the aforementioned reasons. But this long hiatus is expected to end soon. India has been seeing a new era of entrepreneurship mindset.
There is a huge demand and appetite for new-age businesses. Also, SME businesses, which have been gaining market share are seeing active investor interest.
With around 7,000 listed companies, India is still way underpenetrated when it comes to companies approaching the capital markets for raising capital.
When such businesses want to raise capital, they have three options i.e., to either go for debt (public or private) or raise through equity (public-IPO or private).
The cost of debt has been rising while the Indian markets continue to attract capital from retail investors, domestic institutions as well as foreign institutions.
So, raising capital through an Initial Public offering stands as a viable option.
If we take a look at the IPOs, and despite the volatile conditions in the broader markets, recently launched IPOs like Dream Folk Services and Syrma SGS Technologies gave investors a premium of 46% and 42% respectively in the form of listing gains.
Not to forget, that the companies have been leaving more money on the table for IPO investors as this is still the early days for the primary markets to have a dream run.
There are over 50 companies that have applied for IPO and are waiting for the right time to go public, hence a tailwind of the pipeline.
Some prominent names that are in the pipeline are Oyo (Oravel Stays), ESDS, Ixigo, amongst others.
The SME IPO pipeline is very strong, and we have seen good appetite at even higher valuations in the market. There is a huge demand for such IPO’s, we are witnessing over subscriptions, and the post-listing gains are looking strong, while we are seeing the lead managers being busy in getting such SME companies listed.
There are around 70 SME IPOs that have already launched since the beginning of this financial year.
The bottom line is that the appetite for IPO’s is showing a healthy sign of recovery. Not only primary markets but FIIs are too finding India as the most investable region in the world right now.
The abundance of capital coupled with feasible government policies has made India a good investment destination. New-age businesses and SMEs are rapidly moving to the growth stage with greater shifts on profitability and outlook along with business differentiation.
The economy is thriving, and we are hopeful that India would witness a greater number of unicorns in the coming years. We’re truly on the path of becoming self-reliant, in terms of production as well as investments.
After all, India is expected to become the third-largest economy soon, there is no doubt why we would not be.
(Disclaimer: The author is Founder at Green Portfolio. Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
