As per the recent EY IPO Trends Report, the end of Q3 has seen an uptick, after a slowdown post Q2 2022. The three largest IPOs in Q3 in terms of proceeds were Syrma SGS Technology Limited, Tamilnad Mercantile Bank Limited and Dreamfolks Services Limited, with technology, banking & capital markets and media & entertainment being the most active sectors.
As per the EY report, in Q3 2022, the Indian market introduced 4 IPOs vs 19 IPOs in Q3 2021. During Q3 2022, proceeds raised through the main markets equated to US$ 334m via four main market IPOs compared to US$ 5,101 million during Q3 2021, which is a 93% and 79% decline in proceeds raised and in the number of deals respectively. The SME segment raised US$ 68.88m via 33 IPOs during Q3 2022.
During Q2 2022, proceeds raised from main markets equated to US$ 4326 Mn via 13 IPOs compared to 4 IPOs raising US$ 334 Mn during Q3 2022, which is a decline of 92% in the proceeds raised and a decline of 69% in the number of deals, as per the EY IPO Trends Report.
Adarsh Ranka, Financial Accounting Advisory Services Leader, Partner with an Indian member firm of EY Global, said, "The IPO market has witnessed a bearish phase recently. The backlog of companies that have received SEBI approval and are yet to float an IPO is set to give market direction in the upcoming quarters. While volatility in the overall global markets and other macro factors will continue to affect investor sentiments, the pipeline of IPOs and momentum created by successful IPOs towards the end of Q3 2022 could lead to a recovery in the market."
The report further states that PE/VC investments in July 2022 were the lowest in over a year both in terms of value and volume. At US$3 billion, PE/VC investments in July 2022 were 69% lower than the value recorded in July 2021 (US$9.7 billion) and 40% lower than investments in June 2022 (US$4.9 billion). PE-backed IPOs, which were one of the defining features of PE/VC exits last year, continue to remain elusive in 2022.
Adarsh Ranka further added, "With the tightening of liquidity, uncertainty caused by global headwinds and sharp correction in some recently listed companies, the sentiment for IPOs had dampened to an extent. Investors are adopting a cautious approach, both with private equity and large funds reducing their investment spends. In recent times it has been observed that many companies are also trimming down their IPO size."
The EY IPO Trends Report also indicated that more than 15 Indian companies have filed their DRHPs in Q3 of 2022, planning to raise funds in upcoming quarters. So as markets pick up, companies with proven business models, higher standards of governance and better financial positioning are the companies that will find it easier to list.
In line with continued regulatory developments aimed at enhancing disclosures and market practices, there have been several recent amendments such as disclosures in terms of KPIs and price per share based on historical transactions. Confidential pre-filing of offer document as an alternative mechanism, exemption for the requirement of a minimum 10 percent shareholding for the non-promoter shareholders for offering shares through the Offer for sale (OFS) mechanism are amongst many other updates and the detailed regulations have now been rolled out by SEBI.