India IPO market gains on relaxed financial requirements, records 90 in H1’2018

Initial public offerings (IPOs) market in India is gaining momentum hitting an all time high record of 90 in the first half of 2018 and is expected to increase further on relaxed conditions for companies to declare financial results in the country.

Ernst and Young (EY) says the IPO momentum would be sustained by the Security and Exchanges Board of India’s decision to reduce the number of years for which a company needs to declare financial results, from five to three, before going public.

This will “provide an impetus to more IPO activity as lower efforts will be needed,” said Sandip Khetan, partner and national leader of financial accounting advisory services at EY India.

The new listings, according to reports, make up for 16 percent of all listings worldwide and 27 percent more than a year ago.

The proceeds from India’s IPO increased 28 percent year-on-year during January-June 2018 at $3.9 billion. This figure represents 5 percent of the total funds raised via IPOs globally during the period, according to an EY report.

“The IPO ecosystem is evolving at a rapid pace in India with several companies looking to list within 2018,” Khetan said.

Of the 90 companies, 15 that went public in India during January-June 2018 listed their stocks on both of the country’s leading bourses, the National Stock Exchange (NSE) and BSE.

These 15 accounted for 93 percent of the total proceeds during the period, EY said.

The highest number of IPOs in India during the first half of 2018 was from the industrial sector, which also topped in terms of proceeds. The companies from this sector that debuted on the stock market in 2018 include Varroc Engineering and Sandhar Technologies.

Other key sectors were banking (Bandhan Bank), hospitality (Lemon Tree Hotels), and food services (Barbecue Nation).

During the second half of the year, it is likely to be India’s burgeoning renewables industry that will see a surge in IPO activity.

“Many companies in this (renewables) sector are preparing for initial public offerings,” EY said.

For instance, ReNew Power, India’s largest renewable energy producer, plans to raise $390 million through a public listing, while Adani Green Energy, the firm that built the world’s largest solar plant in Tamil Nadu, is also eyeing an IPO.

The Nigerian IPO market is equally on the bounce as more companies are lining up to list on the Lagos stock exchange, kick starting the country’s IPO market after a long drought.

IPOs dried up in Nigeria after a 2008 crash, aggravated by the global financial crisis, wiped more than 60 percent off the stock market’s capitalization. The benchmark share index has since recovered, gaining 42 percent last year but IPOs have yet to resume, apart from oil company Seplat’s dual listing in Lagos and London in 2014.

According to the McKenzie’s Cross-Border Index, domestic and cross-border initial public offering (IPO) capital raising by African issuers in H1 2018 increased by 33 percent year-on-year to $396 million, while volume grew by 25 percent to 5 IPOs.

However, the Index also shows that when compared to the same period in previous years, IPO activity in H1 2018 is low: compared with H1 2016, capital raising is lower by 35 percent; compared with H1 2015 and H1 2014, value is down by around 70 percent.