Following the global trend, Indian IPOs began last year well with impressive numbers for 2018 overall as IPOs raised $5.5 bn from 161 listings. But listings suffered from a big end of year dip, according to a report by financial services firm EY.
At the Bombay Stock Exchange and the National Stock Exchange there were only two IPOs in the fourth quarter of 2018, notes the EY India IPO Trends: Q4 2018 report. The trend in the small and medium enterprise market was also apparent. There were eight IPOs in the fourth quarter of 2018 – a drop from 42 in the third quarter of the year. It is also a significant drop on the 31 listings in the fourth quarter of 2017.
‘IPO activities in India dropped significantly in Q4 [2018] on account of market corrections and various other domestic and global factors,’ says Sandip Khetan, partner and national leader, financial accounting advisory services, at EY India, in a statement.
This has therefore made Indian companies cautious about listing, continues Khetan. ‘Companies are adopting a wait-and-watch policy and at the same time preparing and filing [the mandatory] DRHP [preliminary prospectus] with the regulator to launch their IPOs immediately when the timing is right.’
In addition, there have been a number of macroeconomic factors which have added uncertainty to the outlook in the country: such as India’s liquidity crisis among non-bank lenders triggered by defaults from the infrastructure finance company IL&FS and currency volatility, which has seen foreign investors sell equity in droves, triggering a dramatic drop in the Indian rupee, notes the report.
An Indian IPO bounce back could be seen in 2019 depending on developments in the political sphere however. ‘The results of a series of upcoming state elections may impact macroeconomic stability in 2019,’ notes the report. ‘If the results are favorable, we expect Indian stock markets to rally and provide momentum to IPO activity, at least in Q1 2019.’
