-By Lav Chaturvedi, ED & CEO at Reliance Securities
The oncoming financial year 2021-22 is likely to be an overwhelming year once again for Initial Public Offerings (IPOs). A number of factors will contribute to the likelihood of the current year being favourable for primary market fund-raising.
Growing retail interest
The growing interest of retail investors along with an increased need for companies to tap the markets for raising capital, had infused a strong momentum in the IPO markets last year, which will also spill over to this year.
Last year was a hit
Between April and January of the financial year 2020-21, at least 34 companies went public, raising more than Rs 21,000 crore from IPOs.
According to Prime Database figures quoted in public forums, the overall main market IPOs received a good response from investors. The public lapped up both small and big players who made a debut last year.
Continued momentum
A whopping Rs 41,863.24 crore is likely to be raised this year. Out of this, the companies that already have SEBI’s approval for their IPOs would raise Rs 19,146.24 crore, and companies awaiting SEBI’s approval are likely to raise Rs 22,717 crore.
Abundant Liquidity and Lower Cost of Funding
The interest rate scenario is expected to remain favourable in 2021-22, IPOs are expected to get continued support from lower cost of funding.
PSU divestments
The successful divestment of PSUs is quite crucial for government to achieve its divestment target of Rs 1.75 lakh crore in 2021-22. These blockbuster listings may potentially aid in sustaining current buoyancy in IPO market 2021-22.
Increased Participation from Foreign Investors
Huge fiscal stimulus announced by the US and European countries in 2020 resulted in huge liquidity sloshing to domestic equities. Foreign Portfolio Investments (FPIs) invested ~US$24bn in Indian equities in 2020, which is the highest ever at least in last 20 calendar years. As India continues to offer promising growth outlook globally, we believe FPIs flow to Indian equites should remain favourable in 2021-22.
To conclude
India is expected to witness a sharp uptick in capital expenditures in 2021-22 from central government and select large states. Additionally, a number of reform measures undertaken by the government including PLI schemes to stimulate investment activities in the country are likely result in higher capital requirement for corporates. Hence, a large number of companies certainly will look forward for fund raising through IPO route.