BHUBANESWAR: Amid concerns over rupee fall and liquidity crisis in the non-banking financial sector, the Indian stock exchanges have seen 161 initial public offerings (IPOs) raising $5.5 billion during the year. Globally, the exchanges ranked second, while the US remained in the spotlight raising $60 billion with 261 IPOs.
According to EY’s IPO trends: Q4 2018 report, there were only two IPOs at BSE and NSE during the fourth quarter of 2018, as against nine in the corresponding period last year. Even the third quarter has seen three IPOs, it added.
A similar trend was witnessed in the small and medium enterprises market. There were eight IPOs in the fourth quarter of 2018, compared with 31 during the same period a year ago and 42 in the third quarter, showing a drop of 74 per cent and 81 per cent respectively, the report stated.
The drop in IPOs could be attributed to significant corrections in the stock markets in mid-cap and small-cap stocks, along with increasing volatility due to uncertainties around global growth compounded by the ongoing US-China trade wars. Also, there are several macroeconomic factors that contribute to uncertainties, such as liquidity crises among non-bank lenders triggered by defaults by Infrastructure Leasing and Financial Services Ltd and the depreciation of the rupee, the report said.
“The IPO activity dropped significantly in Q4 as compared to the last quarter on account of market corrections and various other domestic and global factors. Companies are adopting a ‘wait-and-watch’ policy and at the same time, preparing and filing DRHP (Draft Red Herring Prospectus) with the regulator, to launch their IPOs immediately when the timing is right,” said Sandip Khetan, Partner and National Leader, Financial Accounting Advisory Services, EY India.
Sectorwise, the industrial sector — construction and engineering — was the most active in terms of the number of IPOs, whereas the financial services sector was at the top in terms of issue proceeds, he added.
Poor response
While companies like Aavas Financiers (0.97 times) and Garden Reach Shipbuilders (1.02 times) just about managed to sail through, the last mainline IPO by Dinesh Engineers (September 28-October 3) had to be withdrawn amid poor investor response.