India recorded 10 IPOs worth $1.4 billion in Q1 of calendar year 2020: EY India

India recorded 10 Initial Public Offerings (IPOs) worth $1.41 billion in proceeds and $1 million in median deal size during the first quarter of 2020, with its stock exchanges (BSE & NSE, including SMEs) ranking eighth globally in terms of the number of IPOs.

The consumer products and retail sector was the most active with three IPOs launched on SME markets with about $1 million each, according to a study by EY India.

The IPO of SBI Cards and Payments, which was subscribed over 22 times, has been India’s largest IPO in over two years, with an issue size of $1.4 billion. In the main markets (NSE and BSE), there was one IPO in Q1 of 2020 versus five IPOs each in Q1 and Q4 of 2019, representing an 80 per cent drop.

However, the recent amendments (72 changes in 65 sections) made to the Companies Act in March 2020, will allow Indian companies to directly list on certain foreign stock exchanges, providing easier access to deeper and diversified pools of capital, a broader investor base, better valuations and in turn, boosting the India brand globally, it said.

Biggest crisis in decades

“The Covid-19 pandemic is the biggest crisis seen in decades. It continues to impact livelihoods and economies worldwide, creating uncertain times. Indian capital markets have experienced significant erosion of market capitalization and companies will take time to recover. While this may present a viable long-term investment opportunity, caution is being observed in the short-term. Sectors like lifesciences, pharmaceuticals and digital are likely to revive sooner in the current economic climate,” said Sandip Khetan, Partner and National Leader, Financial Accounting Advisory Services (FAAS) at EY India.

In the SME markets, there were nine IPOs in Q1 of 2020 versus 15 IPOs and six IPOs in Q1 of 2019 and Q4 of 2019, respectively, a 40 per cent fall as compared with Q1of 2019 and a rise of 50 per cent over Q4 of 2019.

Governments, companies, investors and markets are closely monitoring the impact of Covid-19. IPO activities are likely to pick up momentum only post elimination of the pandemic. Further, the steps government and regulatory authorities take to boost the economy will be key for the revival of capital markets.

Global findings

The Asia-Pacific (160 deals raising $16.8 billion in proceeds) and the Americas (40 IPOs raising $8.2 billion in proceeds) ended Q1 2020 ahead compared with Q1 2019 by both deal number and proceeds, while EMEIA (35 IPOs raising $3.5 billion in proceeds) slowed by deal number. The industrials sector dominated in Q1 2020 with 45 IPOs raising $6.3 billion. By deal numbers, technology (40 deals) and healthcare (30 deals) were also active during 2020.

The Americas saw a 47 per cent rise in proceeds ($8.2 billion) and a 14 per cent rise in deals (40 IPOs) compared with Q1 2019. the US exchanges accounted for the majority of Americas IPO activity with 60 per cent by deal numbers (24 IPOs) and 89 per cent by proceeds ($7.3 billion) in Q1 2020. There were seven cross-border IPOs in Q1 2020, where China was the top country of origin with six deals.

The Toronto Stock Exchange and TSX Venture Exchange saw three IPOs raising $7 million in total proceeds. Meanwhile, Brazil’s B3 market saw four IPOs raising $785 million in proceeds.

Strong start to APAC IPO markets

The Asia-Pacific region prevailed with 160 IPOs and $16.8 billion in proceeds in Q1 of 2020, a 28 per cent and 110 per cent rise compared with Q1 2019, respectively, and these accounted for 68 per cent of the global deal numbers and 59 per cent of proceeds.

In Greater China, IPO activity in Hong Kong was more negatively impacted than within the Mainland China exchanges. Combined, Greater China deal numbers increased 34 per cent (90 deals) while proceeds increased by 104 per cent ($13.2 billion) compared to Q1 of 2019.

Japanese exchanges also continued to flex throughout the quarter with 28 deals and $592 million in proceeds, representing a 22 per cent rise in deals but a 21 per cent fall in proceeds compared to Q1 of 2019.

Given the Covid-19 outbreak and its negative impact on global economic activities, IPO markets are not expected to quickly rebound in Q2 2020. However, while Q3 is typically a slower time of the year, there may be increased IPO activity as the market attempts a reset and the global pipeline looks for the next IPO window.