Indian IPO market experienced significant slowdown in Q1: EY report

After record-breaking levels of IPO activity in 2021, volatile market conditions have resulted in a significant slowdown during the first quarter of 2022, finds a report by global accounting firm EY.

The report -- titled ‘Global IPO Trends Q1 2022’ -- points out that in Q1 2022, 16 new IPOs were introduced in the Indian market raising $995 million via three main market IPOs, compared to 23 IPOs during the same period last year which raised $2.57 billion, highlighting a decline of 60 per cent in funding raised and a decline of 82 per cent in the number of deals.

The report attributes the reversal to a range of issues, including geopolitical tensions, stock market volatility, price correction in over-valued stocks from recent IPOs, growing concerns about a rise in the commodity and energy prices, the impact of inflation and potential interest rate hikes and COVID-19 induced lockdown.

 

The three largest Indian IPOs were Adani Wilmar, Vedant Fashions and AGS Transact Technologies, with consumer products and retail being the most active sector followed by the diversified industrial products, the report said.

“The IPO momentum of a blockbuster 2021 has not carried over to 2022 so far. Issuance and proceeds are well off last year's pace, as geopolitical uncertainty along with other macro factors continues to affect investor sentiment,” said Sandip Khetan, Partner and Financial Accounting Advisory Services Leader, EY India.

Further, the report expects to have a strong pipeline for IPOs in Q2 2022 as 20 companies have filed their DRHPs in Q1 of 2022, planning to raise funds through the public market in the current calendar year.

 

“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. There were also several IPO launches postponed due to market uncertainty and instability,” the report said.

Moreover. EY suggests a robust activity in the private market with more than 10 companies gaining Unicorn status in Q1 2022. “PE/VC investments in 2022 continue good momentum, with Jan-Feb 2022 investments ($10.3 billion) being more than twice that of Jan-Feb 2021 ($4.1 billion) but 7.6 per cent lesser than the previous two-month period Nov-Dec 2021,” said the report.