According to the Q4 IPO trends report released by EY, the leading global professional services organization, the fourth quarter of 2022 witnessed the highest number of deals after the relatively muted activity throughout the year. Over 10 companies have filed their Draft Red Herring Prospectus (DRHPs) in Q4 of 2022 signaling a potentially brighter 2023.
Following a slowdown in Q3 2022, there was heightened momentum in Q4in the Indian stock exchanges (i.e. BSE and NSE) with 18 IPOs versus 4in the previous quarter, representing an increase of 350%.
As per the report, consumer products and retail, diversified industrial products and technology were the most active sectors with 11, 9 and 8 IPOs launched respectively. There were 34 IPOs in the Small and Medium Enterprises segment in Q4 2022 as compared to 33 IPOs in the previous quarter.
Adarsh Ranka, Financial Accounting Advisory Services Leader, Partner with an Indian member firm of EY Global said, "IPO activity in the fourth quarter increased by 4x as compared to the previous quarter, demonstrating the growing prominence that our country is gaining as a global investment hub. While IPO issue proceeds by the companies are relatively small, the recent IPO activity is likely to welcome a brighter outlook for Indian capital markets this year."
Prashant Singhal, Partner and Emerging Markets Technology, Media & Entertainment and Telecommunications (TMT) Sector Leader, EY said, "We saw several IPOs concluding with good post-listing performance. Unlike earlier when capital markets significantly relied on foreign institutional investors, this robust growth pattern will continue because these companies are supported by domestic retail and institutional capital. The investments in domestic mutual funds and vehicles like Alternate Investment Funds are also compelling. A few more quarters like this will hopefully bring back some buoyancy to the market".
In terms of the issue size, Global Health Limited was the largest IPO (US$ 0.27 b) in Q4 2022.
Pranav Sayta, Partner and international Tax and Transaction Services Leader, EY said, "India clearly seems to stand out as one bright spot in the present-day global environment compared to most other larger economies. To optimise the tax and other costs of the entire exercise from the standpoint of the company and all stakeholders, it is always wise to start planning well in advance and set a clear roadmap. This is essential for meeting the desired IPO schedule and ensuring the regulatory compliances without compromising any of the business goals".
While there has been volatility in the macro-economic environment, inflation is coming under control, India has witnessed more activity than the previous quarters and has been resilient compared to the global economy. It is not possible to time the markets but adopting a holistic and comprehensive approach would hold companies in a good state to be ready to tap the markets as the IPO window opens.