MUMBAI : Stormy markets have put public plans to sell shares of almost $1.6 trillion on hold as businesses and investors await a return to normal times. According to a Prime Database study, this includes companies that have received approval for initial public offerings (IPOs) worth $Rs 89,468 crore and issues pending approval totaling $69,320 crores.
Markets around the world have been in turmoil since Russia invaded Ukraine in late February and the US Federal Reserve initiated interest rate hikes. The moves have boosted commodity prices around the world and drained money from stock markets, dampening enthusiasm for IPOs.
Investor interest is muted, a private banker said. “Of the companies that the Securities and Exchange Board of India (Sebi) has approved for IPOs, nearly 50 have completed roadshows. They have met with investors, but the level of investor interest is significantly low,” he said. Deals are getting “very difficult,” the banker said, pointing to the carnage in small- and mid-cap stocks, even as Nifty and Sensex has held up a bit this past week.
Notable IPO hopefuls awaiting better times include Fab India, Aadhar Housing Finance, Go Airlines, PharmEasy, Oravel Stays (Oyo), Droom, Ebix, Gemini Edibles and Fats India, Five Star Business Finance, TVS Supply Chain Solutions, Macleods Pharmaceuticals, Navi Technologies, Joyalukkas India, and KFIN Technologies.
It’s unclear when the market will stabilize, an analyst at a brokerage said. “Sometimes companies delay IPO plans due to bear markets. More importantly, companies are right now in a wait-and-see mode,” she said. India’s Life Insurance Corp. mustered the courage to seize the markets, but many others expect better market conditions, the analyst said on condition of anonymity. .
The banker mentioned above said that some companies have not started to engage investors because they are not sure they will get the desired valuation now. According to him, mutual funds also want to wait another quarter for more clarity on the war in Ukraine before investing in startups. National institutions that have gotten bigger don’t want to just add another company to their portfolio and want to wait for good opportunities, he added.
Investors are also not interested in startups that are still burning through cash, especially since many high-profile companies like Paytm and Zomato that went public last year have been trading well below their issue price, even before the impact of this year’s volatility.
A banker at a state-owned lender said there is a mismatch in valuation expectations between the issuer and the investor. The Fed’s rate hike and inflation concerns are also forcing companies to defer IPOs, he said, seeking anonymity.
Gaurav Mistry, a partner at DSK Legal, said that the IPO market has slowed due to multiple reasons, such as high commodity prices and interest rate hikes, both domestically and globally. Additionally, the correction in recently listed companies, especially new age tech companies, has raised concerns from both companies and investors.
“The volatility has resulted in a delay in the consummation of several IPOs. The geopolitical situation, along with inflation, is one factor that will dictate momentum.” Sandip Khetan, Partner and Leader of Financial Accounting Advisory Services at EY India.