India’s IPO market recorded strong performance in 2016 with 83 IPOs raising $3.8 billion this year, and the activity looks set to remain strong driven by a combination of high investor confidence and regulatory reforms, says an EY report.
According to the quarterly EY Global IPO Trends: 2016 (Q4), the October-December quarter witnessed a robust performance for IPOs in India and this promising trend is expected to reverberate during next year as well.
The BSE, National Stock Exchange and SME boards witnessed 83 IPOs raising $3.8 billion altogether in 2016.
Globally, entrepreneurial and investor confidence was “challenged” throughout 2016 by heightened political and economic uncertainty. As a result, the number of IPOs in 2016 fell 16 per cent year-over-year to 1,055 and capital raised was down by 33 per cent to $132.5 billion.
India was the standout performer at the country level, recording a 38 per cent increase in deal volume and a 79 per cent surge in proceeds raised, driven by stronger economic fundamentals and a pro-business political regime.
“Continuing regulatory reforms and positive investment climate have helped India dominate in terms of number of deals,” Pankaj Chadha, Partner with an Indian member firm of EY Global said, adding that continuous changes in investment climate and further policy improvements like implementation of GST could fuel even more demand resulting in need for equity and more action in the IPO market place.
Sectorwise, technology, industrials and healthcare are the top three segments trending globally. In India, new generation sectors like renewable energy are likely to show higher activity in addition to traditional Banking, Insurance and Consumer goods sectors, Vish Dhingra, Executive Director with an Indian member firm of EY Global said, adding that government’s plans to revive strategic public sector disinvestment may further add to market activity in India.
“Looking beyond Europe and the Middle East, India is likely to remain the jewel in the crown of IPO activity in EMEIA (Europe, Middle East, India and Africa) in 2017,” the report said.
It further noted that with a supportive political backdrop, upbeat economic sentiment, improved business confidence, easing inflationary pressure and stable foreign direct investment inflows, the pipeline is looking solid for 2017.
PE deals fall to $16 bn in 2016; Markets pin hope on new year
Private equity investments fell to $16 billion in 2016 amid slump in valuations, especially in once-venerated ecommerce sector, but the markets are hoping for hectic deal activities in the new year.
According to experts, the private equity space was abuzz with deal activities throughout the year, both in terms of exits and investments, but the kitty was smaller in comparison to 2015. In fact, most of the IPOs in 2016 were offer for sale by PE owners, which were well received among investors.
According to PwC, overall PE Investments amounted to $16.3 billion across 652 deals, registering year-over-year 18 per cent decline in terms of value and 23 per cent in terms of volume, respectively.
The year 2016 witnessed around $7.2 billion worth of exits with strategic sales contributing around 42 per cent of the value, as per PwC data.
According to another major consultancy Grant Thornton, the year saw around a 1,000 transactions contributing just below $12 billion in value. While the number of transactions remained almost the same as 2015, there was a fall of 25 per cent in the overall valuation.
"2016 struggled to witness large transactions in the PE space and this was perhaps because the focus for the last couple of years has been on the start-up sector where transaction sizes have been relatively small," said Prashant Mehra, Partner, Grant Thornton India LLP. The trend of investments has remained "difficult and different" in 2016 and the year saw many e-tailers reporting a significant decline in number of orders.
Global investment bank Morgan Stanley marked down Flipkart valuation for the third time to $5.6 billion. The e-retail giant was valued at around $15 billion in June 2015 when it last raised funds.