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Why fiscal 2021-22 will be a good year for IPOs
Posted on October 12, 2021
-By Lav Chaturvedi, Managing Director and CEO of Reliance Securities
The coming 2021-2022 fiscal year is set to again be an overwhelming year for Initial Public Offerings (IPOs). A number of factors will contribute to the likelihood that the current year will be favorable for fundraising in the primary market.
Growing interest in retail
Growing interest from retail investors, as well as an increased need for companies to tap markets to raise capital, had injected strong momentum into the IPO markets last year, which will reverberate this year as well. .
Last year was a success
Between April and January of the 2020-21 fiscal year, at least 34 companies went public, raising more than Rs 21,000 crore through IPOs.
According to Prime Database figures cited in public forums, global IPOs in the main market have been well received by investors. The audience thrilled players young and old alike who made their debut last year.
Continuous dynamics
A huge crore of Rs 41,863.24 is expected to be increased this year. From this, companies that already have SEBI approval for their IPOs would increase Rs 19,146.24 crore, and companies awaiting SEBI approval are likely to increase Rs 22,717 crore.
Abundant liquidity and reduced financing costs
The interest rate scenario is expected to remain favorable in 2021-2022, IPOs are expected to benefit from the continued support of a lower cost of funding.
Supply unit transfers
The successful divestment of PSUs is crucial enough for the government to meet its divestment target of Rs 1.75 lakh crore in 2021-2022. These blockbuster listings have the potential to help maintain the current buoyancy in the 2021-22 IPO market.
Increased participation of foreign investors
The huge fiscal stimulus measures announced by the United States and European countries in 2020 resulted in a huge liquidity drain into domestic stocks. Foreign Portfolio Investments (REITs) invested around US $ 24 billion in Indian stocks in 2020, the highest on record in at least the past 20 calendar years. As India continues to offer promising growth prospects globally, we believe REIT flows to Indian equities are expected to remain favorable in 2021-2022.
To conclude
India is expected to see a sharp increase in capital spending in 2021-2022 from central government and some major states. In addition, a number of reform measures undertaken by the government, including PLI programs to stimulate investment activities in the country, are likely to result in increased capital requirements for companies. Therefore, a large number of companies will certainly look forward to raising funds via the IPO route.
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