IPO market saw major slowdown: EY report
MUMBAI: Volatile market conditions have led to a significant slowdown in the Indian initial public offer (IPO) market during the first quarter of 2022 compared to the first quarter of 2021, according to the EY Global IPO trends report.
The Indian markets witnessed 16 IPOs in Q1 2022 compared to 23 IPOs in Q1 2021, according to the EY report.
During Q1 2022, $995 million was raised through three main market IPOs compared to $2.57 billion during Q1 2021, a decline of 60% in proceeds and a fall of 82% in the number of deals.
The report has attributed the significant slowdown in IPO activity to several factors including geopolitical tensions, stock market volatility, price correction in overvalued stocks, growing concerns about a rise in commodity and energy prices, the impact of inflation and potential interest rate hikes, as well as the covid-19 pandemic risk continuing to hold back full economic recovery.
The small and medium enterprises firms however raised $17.46m through 13 IPOs during Q1 2022.
In line with the sharp decline in global IPO activity, there was a considerable fall in cross-border, unicorn, mega (proceeds above $1 billion) and SPAC IPOs. Several IPO launches were also postponed because of market uncertainty and instability, the report pointed out.
“Globally we are witnessing an inflationary environment in all western economies which has rattled many investors and bankers. Policymakers are trying to figure appropriate response to this inflationary environment including the added weight of geopolitical challenges. Companies that are planning to tap the markets will have to watch out for such large events to settle. Post this we can see a strong uptick in the IPO activity,” said Sandip Khetan, partner and financial accounting advisory services leader, EY India The IPO momentum of a blockbuster 2021 has not carried over to 2022 so far, Khetan said. Issuance and proceeds are well off last year’s pace, as geopolitical uncertainty along with other macro factors continues to affect investor sentiment. “The backlog of IPOs could lead to an upswing in volumes if volatility does moderate and earnings are robust,’’ Khetan said.
The slowdown is evident as many big-ticket IPOs are in the pipeline but are yet to see the light of the day. Once the situation a lot of IPOs may start coming to the markets in the next 3-6 months, he said.
The EY report also highlighted that there is a strong pipeline for IPOs in Q2 2022 and beyond.