IPO: PE-backed companies to keep IPO frenzy active this year

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The calendar year 2021 created history, with more IPOs in a year than in the last three years combined.

Sixty-five companies raised ₹1.35 lakh crore through the IPO route, the highest in the history of the Indian capital market.

On average, new listings in CY21 gave an astonishing 60% returns compared to Nifty 100 / BSE 500, where returns have been 25-30%. A combination of FOMO, TINA, Greed and Fear, and access to liquidity made investors lap up IPOs sustainably. ‘IPO allotment status’ and ‘Grey Market Premium’ appeared among Google India’s ten top searches – clearly indicating heightened interest and participation from the Indian retail investors amidst the new normal.

Early signs are that Indian capital markets differentiate between business models, categories and management teams. This trend will likely consolidate further in CY22 and beyond as the ‘honeymoon period’ will inevitably get over.

Going forward, Indian businesses funded by private equity capital are now finding their way into public markets. This pipeline of private ownership looking to list remains large enough to last through CY22 and beyond. In addition to new-age tech companies, we are likely to see listings from electric vehicle-focused businesses, healthcare and speciality chemicals, consumer companies and a small number of financial services and real estate companies.

Apart from this, gaming companies with high user traction and monetisation will be excellent candidates for listing.

Middle India models (like Meesho, DealShare, DailyHunt, ShareChat, etc.) will grow in sophistication and scale and interest investors. Several new-age Indian tech companies will travel to South-East Asia, the Middle East and selectively to the US for their business. In the next two years, these companies will sow the seeds for Indian MNCs. These could be great value creators. While tech companies in the US comprise around 25-26% of aggregate market capitalisation, this proportion is negligible in India. In 2022, all eyes will be on India’s largest insurance company listing.

Sebi has been instrumental in paving policy-changes for new-age tech companies to list in India. Many such companies were early assessing an overseas listing. With high and increasing investor acceptance, exceptional entrepreneurs, reasonable valuations and a solid regulatory framework, the debate on overseas listings for India tech should now be behind us.

Continuing regulatory support is essential to ensure these tech companies consider India their first destination port for listing. An occasional blow-up or a post-listing performance debacle is always likely. The environment will question these companies’ business models and the regulator’s role in such events. The regulator must carefully balance taking corrective steps and ensuring that the baby is not thrown away with the bathwater during such times.

(The author is the MD & CEO of Kotak Mahindra Capital Company. Views are personal)


Usama Younus

Usama Younus is the owner and super admin of the site he's is an expert in news editing, tech and entertainment magazine management, and articles editing E.T.C.

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