With an all-time high mobilisation of over Rs60,000 crore, 2017 was a blockbuster year for initial public offerings, or IPOs, in India. What went unnoticed, however, was how the country stood out on the global stage (See Change in Pecking Order). In 2017, it jumped 16 positions, leaving behind the Singapore Exchange, the Japan Exchange Group and many other top players to feature among the top six exchanges in capital raising through IPOs. The amount mobilised stood at more than $10 billion in 2017, according to the latest data released by the market regulator, the Securities and Exchange Board of India (Sebi).
Sebi releases its handbook of statistics on money mobilised through IPOs on global stock exchanges every year. In 2016, India was ranked at the 22nd spot with fund raising of $400 million. It was ranked even below this in 2014 ($240 million) and 2015 ($430 million). The record IPO run of 2017, however, prepared the ground for change in the pecking order. The previous IPO high in India was in 2010 when Rs37,535 crore was mobilised.
The BSE saw the highest growth (25 times) in the amount mobilised between 2016 and 2017 among the top 33 stock exchanges. This was closely followed by Brazil's B3, formerly known as BM&FBovespa, which saw an increase from $0.21 billion to $4.5 billion during the same period. Hong Kong Exchange and NASDAQ OMX Nordic Exchange saw declines of 35 per cent and 62 per cent, respectively, while the NYSE recorded growth of three times.
The Year of the IPOs
Munish Agarwal, Director of Capital Markets, Equirus Capital, says 2017 turned out to be a phenomenal year for Indian capital markets as companies across sectors utilised the robust investor sentiment to launch IPOs delayed for years. "While FIIs pumped in a little over $7 billion, Indian investors realised that post demonetisation and slowdown in real estate, equity markets are one of the few relatively higher yielding markets, and thus Indian markets gained from healthy demand for new paper. Additionally, the really big IPOs from insurance companies, and aggressive government divestment plan, added to the volumes," says Agarwal.
Meanwhile, the Sensex soared a whopping 28.1 per cent in 2017, snapping the two-year lacklustre performance - it had delivered a negative return of 5.1 per cent in 2015 and nearly 2 per cent in 2016. The index has returned 13.3 per cent so far in 2018.
The Boom Continues
The IPO boom is continuing in 2018 too, but it may not breach the record of 2017. The number of offerings, however, could be higher. With 21 issues hitting Dalal Street so far in 2018 (till August), 42 per cent of the IPO amount mobilised last year, or Rs28,508 crore, has already been raised. Some prominent companies that have raised money include Bandhan Bank with an issue amount of Rs4,473 crore, Hindustan Aeronautics (Rs4,063 crore), ICICI Securities (Rs3,480 crore) and HDFC Asset Management (Rs2,800 crore).
According to data sourced from PRIME Database, around 30 IPOs with an estimated issue amount of Rs37,373 crore have received Sebi approval and are in the pipeline. Another 26 IPOs with an estimated amount of Rs35,911 crore are awaiting Sebi approval.
"The transaction complexion will change and barring the large insurance IPOs, which tipped the scale last year, the momentum will continue. We will see higher number of transactions for 2018 (as indicated by over 45 IPO documents at various stages of approval and launch) as more mid-sized issuers launch IPOs, but the transaction value may be lower, as the bunching together of IPOs by insurance companies is difficult to replicate in 2018 or thereafter," adds Agarwal.
Going forward, there are concerns with respect to the overall macro and political landscape. "The changing global trade climate has emerged as a major concern for foreign investors, who are re-evaluating their portfolios to position for increasing protectionism across the developed world. This, coupled with change in classification of mutual fund schemes by Sebi, weaker currency and intermittent bouts of political and policy uncertainty, has led to domestic as well as institutional investors becoming increasingly risk-averse," says Agarwal. The FIIs have been net sellers so far in 2018 and have pulled out over Rs4,900 crore from the country.