Despite the challenges posed by the Coronavirus pandemic, the coming fiscal year 2021-22 is expected to be another record-breaking year for Initial Public Offerings (IPOs). The probability of the current year being favourable for primary market fund-raising would be determined by a variety of factors.
Interest in retail is growing.
Also through periods of high uncertainty, the rapid growth in retail investor numbers was a significant driving force for the markets in the previous year. In 2020, over 1 core new demat accounts were added, and by January 2021, new investor accounts had reached a new high of 5 crores.
Last year’s event was a big success.
Despite the COVID-19 pandemic dampening consumer sentiments at the beginning of the fiscal year, at least 34 companies went public between April and January of the fiscal year 2020-21, raising more than Rs 21,000 crores via IPOs.The IRCTC stock was oversubscribed 109 times, SBI Cards was oversubscribed 19 times, Ujjivan Small Finance Bank was oversubscribed 100 times, CSB Bank was oversubscribed 48 times, Affle was oversubscribed 48 times, Polycab was oversubscribed 36 times, Neogen Chemicals was oversubscribed 29 times, and Indiamart Intermesh was oversubscribed 20 times.
Maintaining the momentum
The positive momentum for IPOs seen in the previous financial year is expected to continue in this fiscal year, as more companies switch to the primary market to raise funds during the post-pandemic recovery process. This year, a whopping Rs 41,863.24 crore is expected to be earned. The companies that have already received SEBI approval for their IPOs will raise Rs 19,14 crore.
Liquidity aplenty and low funding costs
In 2020-21, the interest rate scenario remained abysmally low, and the system’s abundance of liquidity prompted financial institutions to sell IPO funding products at lower and more reasonable rates.
Public-sector divestments
Finance Minister Nirmala Sitharaman revealed this year’s mega disinvestment plans for two public sector banks and one general insurance company in the Union Budget. She previously stated that the LIC public listing will be completed in the years 2021-22.
The involvement of foreign investors has increased.
The major fiscal stimulus announced by the United States and European countries in 2020 resulted in a massive inflow of liquidity into domestic equities. With India’s good resilience against the Covid-19 outbreak and month-on-month improvement in key economic indicators beginning in June 2020, foreign investors’ confidence in domestic markets has been restored.
To sum up,
In 2021-22, India is projected to see a significant increase in capital spending from the central government and a few large states, which will almost certainly lead to increased capacity utilisation in many industries, necessitating the need for capacity expansion. Besides, the government has introduced a variety of reform steps, such as PLI schemes, to promote investment.
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