The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) continue to lead the global IPO market this year, registering a 50 per cent increase in initial public offerings (IPOs) in the second quarter of 2023, compared to the previous quarter, EY, a global professional services organization, said in a report on Monday.
The report ranks BSE and NSE in first place in the number of IPOs launched and 8th spot in terms of issue proceeds this year, with no cross-border deals so far. Both stock exchanges saw six IPOs in Q2 2023, including a fund-raising event by an infrastructure investment trust, compared to 14 IPOs in Q2 2022, according to the “IPO Trends Report”.
The report said that in Q1 2023, there were four IPOs, representing an increase of 50 per cent compared to Q1 2023 and a decrease of 57 per cent compared to Q2 2022.
The small and medium enterprise (SME) market saw 32 IPOs in Q2 2023, compared to 38 IPOs in Q1 2023 and 18 IPOs in Q2 2022, indicating robust growth in the segment. It represents a decrease of 16 per cent from Q1 2023 and a 78 per cent increase from Q2 2022.
Positive Economic Outlook
Commenting on the IPO trends, Adarsh Ranka, partner at Financial Accounting Advisory Services Leader, a network firm of EY Global, in a press release, said, “India’s IPO market showcases its immense potential. India must continue to focus on enhancing regulatory frameworks, improving corporate governance practices, and fostering investor education. In the forthcoming months, there is anticipated to be significant momentum in the Indian IPO market, encompassing both the main (BSE and NSE) and SME market segments.”
The report says around 13 companies have filed Draft Red Herring Prospectus (DRHPs) in Q2 2023, contributing to the current IPO pipeline. The most active sectors in IPOs include hospitality, construction, automotive, transportation, industrial products, and real estate.
The introduction of various amendments by the Securities and Exchange Board of India (SEBI) to enhance the transparency of capital markets has spurred IPO growth. For instance, it has introduced changes to the pricing of issues, disclosure of key performance indicators (KPIs), mandatory pre-filing of draft offer documents, creation of a Social Stock Exchange, changes in monitoring agency functions and the definition of SMP to make it more inclusive.
The sustained inflows from foreign institutional investors (FIIs) due to the country’s stable macroeconomic outlook, political stability, and impressive financial results led to an 8 per cent market rally since April 2023. The report further says, “India’s consistent GDP growth of over 7 per cent reinforces positive prospects for the market.”
Also, Cube Highways Trust, an asset class related to the infrastructure investment trust, raised $637.5 million, making it the largest IPO in Q2 2023.
Veenit Surana, Partner, EY India, notes in the release, “The recent amendments introduced by Sebi lay a strong foundation for future IPO activity and empower companies to align with best practices, reinforcing the trust of investors in the Indian capital markets.”
As per the report, India’s benchmark equity indices, Nifty and Sensex, settled at record closing highs on June 30, 2023. Nifty 50 surpassed 19,200 but closed at 19,189.05, while Sensex ended trade at 64,718.56, higher by 800 points, it said.
