Initial Public Offers (IPOs) in India are set to hit a six-year high in 2016 and estimated to raise more than USD 5 billion, largely owing to a growing appetite for equities and positive sentiment on the growth front, says an EY report.
In the first quarter of 2016, India was ranked in the top six countries in terms of number of deals globally and BSE was featured in the top six exchanges in terms of funds raised within Europe, Middle East, India and Africa (EMEIA) region, which amounted to USD 197 million from 8 deals.
The deal traction witnessed in the first quarter of this year is likely to continue in the coming months as well, largely due to positive sentiment on growth, government's plans to divest stake in state-owned enterprises and a robust pipeline built up over the past six years.
"IPOs in India are set to hit a six-year high in 2016 as the companies looking to go public, supported by a growing appetite for equities and an uptick in economic growth, are estimated to raise more than USD 5 billion," EY said.
Meanwhile, global IPO activity slowed significantly in the first quarter of 2016 with a total of 167 deals raising just USD 12.1 billion, registering a 39 per cent drop in number of deals and a 70 per cent decline in total capital raised as compared to the same period last year.
"2016 has already started on a positive note, with six IPOs having raised around USD 375 million in the first quarter. A number of firms have already received SEBI approval and we could see successful IPOs from some of these during the year," said Amit Khandelwal, National Director & Partner, Transaction Advisory Services, EY.
He said the general sentiment for the IPO fund raise to remain positive for the rest of the year and closely track the general economic and investment environment and PE exits would continue to be the dominant theme in 2016.
"Divestment are expected to be another contributing factor to IPO market with the government looking to list the profitable PSUs, notably the insurance majors. Financial services (microfinance, payments banks), ITeS, life science and automotive are expected to be the more active sectors," Khandelwal said.
Meanwhile, in 2015, the Indian IPO market saw significant momentum after a gap of nearly four years when 21 firms raised over USD 2 billion from the markets.
2015 saw increased number of private equity backed firms successfully accessing the IPO market driven by the need for the companies to provide exit to the investors.
"The other key positive aspect was the re-emergence of large issues with the average size of the IPO getting close to USD 100 million, mark with nearly dozen companies raising over USD 75 million," Khandelwal said.
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