Jittery mkt leads to longest dry spell for IPO launch in a year

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Bombay : There is a lull in initial public offerings (IPOs) after a storm last year. Consolidation over the past few months has made it difficult for companies to tap into capital markets to raise funds. As a result, there has been a dearth of IPOs for over a month. It is the longest dry spell since May 2021, the only month in last year’s IPO boom when no public issuance hit primary markets.

The calm phase is mainly due to heightened geopolitical tensions, rising inflation concerns and global growth worries that have rattled equity markets.

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IPO lull

There is no new IPO in sight. However, whether this phase can be longer than the June 2020 quarterly lockdown-induced gap depends on when stability returns to the markets. The IPO pipeline is still strong, because the problems are worth 1.06 trillion have already received regulatory approval. However, companies are reluctant to launch IPOs in this choppy market.

“As things stand, market volatility shows no signs of abating and the general mood is also bearish,” said Pranav Haldea, Managing Director of PRIME Database Group. “In these markets, typically and historically, companies don’t like to go public,” Haldea said.

Retail and institutional investors flooded the primary markets soon after the pandemic crash. Consequently, IPO fundraising hit a record high 1,200 billion in 2021. The euphoria has been ebbing since the beginning of 2022, however, even if a big effort has been made by the largest public issue, that of the Life Insurance Corporation of India.

Still, the public equity fundraising scenario is not entirely bleak as the June quarter saw 10 public issues compared to six in the same period last year.

“It’s only been about a month since there’s been any IPO activity. We don’t think the IPO market has completely dried up,” said Prashant Rao, Director and Head of Equity Markets, Anand Rathi Investment Banking. “That being said, these are challenging times and companies with approvals in hand are waiting for the right launch opportunity window,” he said.

Meanwhile, corporate fundraising looks challenging amid a highly volatile stock market and rising interest rates.

“There have been market challenges as well as some performance pressure with companies that have recently launched IPOs. Therefore, some investors are wary of new IPO opportunities. Many companies are already in talks to find other sources of funding until the IPO market opens,” Rao said.

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