ipo market news: Despite Indian market resilience, why IPO-bound firms are deferring issues

New Delhi: While the primary market is showing signs of recovery, a full blown IPO season is still some time away. A number of companies are either withdrawing their IPO papers or postponing their issuance, data shows. Some of the companies have Sebis observations that are likely to expire in the next few weeks, but they haven’t announced their IPOs yet.

Dalal Street experts believe rising volatility, poor financials and muted response from companies during the bidding process and debut are key factors weighing on sentiment for companies looking to raise fresh capital.

Amishi Kapadia, Global Head – Merchant Banking, Yes Securities, said: “Global macro factors including rising interest rates, tapering of quantitative easing by the Fed and ECB and the situation in Europe due to the Ukraine war have impacted liquidity.”

“A high OFS component in many IPOs, where existing owners exit loss-making companies, does not inspire confidence among investors in the public market,” she added.

Venkatraghavan S, Managing Director & Head-Equity Capital Markets at Equirus, added that stale financials, insufficient demand and valuation imbalances are the main reasons behind the issuance’s postponement.

Secondary markets have been volatile recently, so demand for IPOs has been low, he added. “Investors see attractive buying opportunities in select listed stocks, so there must be compelling reasons to look at a new stock.”

The majority of the companies that have pulled out of their D-Street debuts are loss-making, cash-burning new-age internet companies or startups that have been heavily criticized for their valuations.

Anshul Mittal, Head – Investment Banking, Mirae Asset Capital, said that given the recent underperformance of new-age technology companies, investors in the public market are now looking for companies with positive bottom lines and positive cash flows.

“Rising interest rate scenario in the West and geopolitical factors also remain of concern,” he added. “This means that companies that are not flexible on valuations have no choice but to postpone their problems.”

The list includes some big IPOs from tech-focused platforms like API Holdings (Pharmeasy), Byju’s, ANI Technologies (Ola), Oravel Travels (Oyo), Snapdeal, and Droom, among others.

Smaller issues and traditional companies such as Stitched Textiles, Nandan Terry, SSBA Innovations, Macleods Pharmaceuticals and BGV India are also reluctant to reach the primary markets, citing various issues.

Market regulator Sebi has approved at least 70 companies to raise over Rs 1 lakh crore through the primary market over the next 12 months.

VK Vijayakumar, Chief Investment Strategist at

said that market situations are not very favorable for the big IPOs and this space was mixed.

“Reasonably priced IPOs that leave investors something on the table have performed well and are trading at a good premium to issue prices,” he said. “High-priced IPOs are unlikely to find a good response in the market.”

Future of new age companies on D-Street
Internet companies have been in excitement in the post-pandemic era, and experts believe some of the new-age startups are disruptors and have bright futures. Though the path to profitability is paramount for the D-Street debut, experts said.

Equirus’ Venkatraghavan said investors will be watching companies’ growth trajectories closely. “I would also expect a consolidation in the longer term.”

Dalal Street has historically replicated global markets, says Mirae Asset’s Mittal. “We see a positive future for these Dalal Street companies going forward as they scale without burning a lot of cash.”

(Disclaimer: Experts’ recommendations, suggestions, views and opinions are their own. These do not represent the views of Economic Times)

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Russell Falcon

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