Nomura expects Indian IPO market to pick up in second half

The Bombay Stock Exchange (BSE) building in Mumbai, India, on Thursday, Jan. 20, 2022. Life Insurance Corp. of India, the country's largest insurer, plans to file the draft IPO prospectus in the final week of January, which will provide the embedded value as well as the number of shares for sale, according to people with knowledge of the matter.

Nomura Holdings Ltd. expects initial public offerings in India will regain momentum in the second half of this year as indicated by increasing activity in secondary share sales.

“The capital markets on the secondary side which is on the block and QIPs have started to pick up,” Amit Thawani, head of India coverage investment banking at Nomura, said in an interview with Bloomberg Television on Tuesday. “We expect a constructive environment especially in the second half of the year for IPOs.”

Global IPO activity has slowed down recently as the Russian invasion of Ukraine and rising interest rates spurred market volatility. Companies have raised around $1.1 billion through first-time share sales in India so far this year, down from $2.6 billion from the same period in 2021, according to data compiled by Bloomberg.

India’s capital market fundraising will remain robust in the next six to 12 months as companies such as state-owned Life Insurance Corp. and some technology companies are still looking to list in Mumbai, Thawani said. Most of the firms will seek domestic listings instead of going overseas, he added.

Private equity funds will continue to boost mergers and acquisitions volume in India and conglomerates consolidating their domestic businesses is also a driving factor, Thawani said.

HDFC Bank Ltd., India’s most valuable bank, this month agreed to take over the country’s largest mortgage lender Housing Development Finance Corp. in a deal valued at about $60 billion. The merger does create a benchmark for some of the larger financial institutions to think about what their game plan should be for the coming years, Thawani said, adding there could be more consolidation in the sector.

Nomura expects fair amount of activities related to the environmental, social and governance theme in India.

“I would say in the next 12 months you should expect maybe one or two capital market listings from the renewable sector,” Thawani said.