Explained: Russia-Ukraine crisis hits India's IPO market; what is the way ahead?

For the primary markets, 2021 proved to be the best year to date in terms of cumulative fundraising by way of initial public offers (IPOs).

However, the ongoing Russia-Ukraine crisis has dampened the mood of the IPO market. The government is expected to defer the mega initial public offering (IPO) of LIC to the next financial year.
 
The government was looking to sell 5 per cent stake in Life Insurance Corporation (LIC) this month, which could have fetched over Rs 60,000 crore to the exchequer.
 
According to the latest report by Axis Capital, 49 companies have received approvals from SEBI to go ahead with their listing plans.
 
JK Files & Engineering, Elin Electronics, API Holdings, Wellness Forever Medicare, CMR Green Technologies, Capital Small Finance Bank, Jesons Industries, Delhivery, Veranda Learning Solutions, Radiant Cash Management Services, Five Star Business Finance, Waaree Energies, GPT Healthcare, Veeda Clinical Research, Global Health, Sahajanand Medical Technology, Keventer Agro, Le Travenues Technology, Emcure Pharmaceuticals, Sterlite Power Transmission, ESDS Software Solution have already received SEBI nod.
 
Other companies in the fray are: Godavari Biorefineries, VLCC Health Care, India1 Payment, Healthium Medtech, Gemini Edible & Fats India, Electronics Mart India, Puranik Builders, Prudent Corporate Advisory Services, Traxcn Technologies, Fusion Micro Finance, Inspira Enterprise India, ESAF Small Finance Bank, Penna Cement Industries, Skanray Technologies, One Mobikwik Systems, Popular Vehicles and Services, Paradeep Phosphate, Northern Arc Capital, Chemspec Chemical, Go Airlines (India), Shri Bajrang Iron and Ispat, Ruchi Soya Industries, Fincare Small Finance Bank, Jana Small Finance Bank, Utkarsh Small Finance Bank, Arohan Financial Services, Seven Islands Shipping are among the others.
 
"As of date, there are 95 companies that have filed the DRHP with SEBI, out of which 50 have received SEBI Observations and can potentially launch the IPO. Institutional investors, however, are in a risk-off mode right now due to heightened market volatility arising out of ongoing geopolitical tensions," Ashish Kumbhat, Executive Director & Co-Head Equity Capital Markets, Axis Capital told Business Today.
 
"We believe that the markets will become conducive for any kind of fundraise in a few weeks, once global tensions ease-out," he added.
 
"Historically, activity in the primary market is seen only when the secondary market is buoyant. While markets have been choppy since October, the last couple of months have seen an exceptional amount of volatility as a result of which just 3 IPOs have been launched in this calendar year (2022)," said Pranav Haldea, Managing Director at PRIME Database.
 
Citing a similar market situation around 2013, Haldea said there were IPOs worth Rs. 80,000 crore which was holding SEBI approval or had filed with SEBI for approval which did not get launched on account of poor market conditions. IPO is a once-in-a-lifetime event for a company and no company would want to launch their IPO when market sentiment is poor.
 
Haldea added that for companies to start going public again, as a first step, the current conflict situation needs to normalise.
 
"In CY21, we saw 63 equity IPOs raising over Rs. 1.18 lakh crore, which was possible due to buoyant markets and overwhelming participation from all categories of investors - institutional, non-institutional and retail, in most IPOs. The conducive capital markets also encouraged many companies to expedite their IPO plans due to which so many DRHPs have been filed with SEBI," said Vivek Toshniwal, Executive Director & Co-Head Equity Capital Markets, Axis Capital.
 
"Investor sentiments are currently tepid and FPIs have been on a selling spree having sold over Rs. 1 lakh crore inequities in this calendar year. Once sentiments improve, we will see the backlog of IPOs clearing quickly," he added.
 
Manoj Dalmia, Founder and Director, Proficient equities Private limited said, "The war situation between Russia and Ukraine has caused many IPOs to halt. About 40-50 companies were set to raise Rs 77,000 crore from the market. The rising crude prices have caused inflationary concerns for companies, whose effect is seen on the stock prices falling."
 
He argues that the major IPO of LIC was expected to launch by March-end but now it will be done in the next fiscal, while some IPOs like that of Go Airlines, API Holdings, Delhivery, and Emcure Pharma are planning to raise about Rs 25,000 crore from the public market.

However, according to him, the market is currently facing sell-offs by many FII’s, whose support is needed when such big-ticket size IPOs are involved to create liquidity.