After a blockbuster 2017, the primary market is expected to remain robust in 2018 with Dalal Street looking at over Rs 35,000 crore of IPOs, a significant proportion of which are PE-backed, says a report.
"The initial public offer market is expected to remain robust in 2018 due to the resilient nature of the economy and strong domestic liquidity. The IPO pipeline is healthy with dozens of companies looking to go public raising over Rs 35,000 crore through the year," EY said here today.
The consultancy further said a significant proportion of this fresh fund raising are PE-backed.
In a report, EY said PE-backed IPOs have outperformed non-PE backed IPOs on a consistent basis in the past many years. From a sectoral perspective, PE-backed IPOs in financial services have significantly outperformed the sectoral index, it added.
"From a performance perspective, on average PE-backed IPOs have outperformed non-PE-backed IPOs as well as the benchmark index, compared to their offer price across time periods.
"This is not surprising in the emerging markets context, wherein the value add brought in by PE investors comprises operational improvements, putting in place governance structures and streamlined processes and controls to take care of the pain and complexity that comes with growth," Vivek Soni of EY India told reporters.
In 2017, domestic companies raised USD 11.6 billion from around 40 IPOs (excluding SME IPOs). Among the top 10 PE-backed IPOs-- SBI Life Insurance, ICICI Lombard, Au Financiers, Eris Life Sciences, BSE, Godrej Agrovet, Indian Energy Exchange, Mahindra Logistics and Tejas Networks-- hit the market to raise funds, he said.
The leading PE houses, Temasek Holdings mopped USD 3.97 billion from five IPOs, followed by IFC which netted USD 1.5 billion from a similar number of issues, it said.
"Though volatility could potentially delay some IPOs, the medium-term outlook for PE-backed IPOs remains positive in our view," EY India's Sandip Khetan said.
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