- India records four IPOs in the second quarter with Indian stock exchanges (BSE & NSE including SMEs) ranking seventh globally in terms of number of IPOs
New Delhi, 05 July 2020: India recorded four IPOs (US$0.002b proceeds and US$0.38m median deal size) in the second quarter of 2020 with Indian stock exchanges (BSE and NSE including SMEs) ranking seventh globally in terms of number of IPOs according to EY India IPO Trends Report: Q2 2020. Consumer Products & Retail and diversified industrial products were the active sectors (in terms of number of IPOs) with two IPOs launched in each sector on SME markets with approximately US$ 2.08 million.
During Q2 2020, other than the IPO market, we have seen marquee activities by Jio Platforms that have pushed Indian PE/VC investment in May/June 2020 to above US$10 billion. In the SME markets, there were 4 IPOs versus 14 IPOs and 11 IPOs in Q2 2019 and Q1 2020 respectively, representing a significant drop of 71% and 64%. However, several measures rolled out by SEBI amidst the ongoing pandemic provides several temporary relaxations. These include extending the validity of observations on draft offer documents of companies; increasing permissible issue size variations from 20% to 50% and increasing the time period for the declaration of results by listed companies. In addition, the BSE SME segment has also eased the eligibility criteria for listing whereby net tangible assets requirement has halved to INR 15 million and combined positive cash accruals in just one of the past three years is adequate.
Sandip Khetan, Partner and National Leader, Financial Accounting Advisory Services (FAAS), EY India said, “The experience in the last three months has been unprecedented as COVID-19 has severely impacted both, human lives and the economy. Similar to global markets, there has been limited to no activity in the Indian IPO market. Investors and analysts are keeping a close watch on the latest updates provided by companies about their performance as valuations become attractive for deal making. Companies are looking to utilize the current time toward preparing for future fund raising. We expect IPO activity to pick up during the end of 2020 or early 2021.”
Although there has not been much activity, companies are considering their long-term growth plan and have started to engage in conversations towards their IPO preparation in this economic slowdown. For instance- The Government of India has recently invited bids for the proposed IPO of Life Insurance Corporation of India (LIC). This is likely to be the biggest ever IPO to be seen in India.
The impact of COVID-19 continued to play a significant role in declining IPO activity in the first half of 2020. Overall, Q2 2020 saw a decline in IPO activity from Q2 2019 across all regions by deal numbers and for the Americas and EMEIA by proceeds. Global IPO activity slowed dramatically in April and May, with a 48% decrease by volume (97 deals) and a 67% decrease in proceeds (US$13.2b) compared to April and May 2019. This dragged down 1H 2020 regional activities compared with 1H 2019 and overall YTD deal volume (419 deals) and proceeds (US$69.5b) decreased 19% and 8%, respectively, from YTD 2019.
Americas deal landscape slows
US exchanges still accounted for the majority of IPOs in the Americas in the first half of 2020, with 79% by deal volume (64 deals) and 91% by proceeds (US$22.3b); this included five unicorn IPOs. The health care and technology sectors continued to have the highest level of IPO activity in the US in YTD 2020, representing 55% and 25% by deal volume, respectively. The health care sector dominated in proceeds (US$10.2b), contributing 46%, from 35 IPOs.
The Mexican stock exchange posted one IPO valued at US$1.1b, making it the eighth-largest IPO globally in Q2 2020.
Asia-Pacific IPO activity remains stable
Although year-on-year YTD 2020 IPO activity in Asia-Pacific rose by deal number (2%) and proceeds (56%), Q2 2020 saw a decline of 18% compared with Q2 2019 by deal number, while proceeds rose by 28%. Asia-Pacific exchanges accounted for four of the top five exchanges by deal volume and three of the top exchanges by proceeds. Globally, by proceeds, NASDAQ led YTD 2020, followed by the Shanghai Stock Exchange and Hong Kong Stock Exchange. By deal volume, Shanghai, Hong Kong and NASDAQ markets led the way.
In Greater China, IPO activity was up 29% by volume (179 deals) and 72% by proceeds (US$30.9b) YTD 2020 compared with YTD 2019.
In Japan, IPO volume (34 deals) declined 17% YTD 2020, while proceeds (US$625m) dropped by 53%. Australia and New Zealand IPO activity was also down YTD — 41% by volume and 82% by proceeds.
EMEIA also sees IPO deal slowdown
After a strong start to 2020, YTD IPOs (42) and proceeds (US$7.8b) declined 47% by volume and 48% by proceeds in Europe, as the COVID-19 pandemic significantly curtailed IPO activity from March through to May. In the Middle East and North Africa (MENA), IPO activity was down 11% by volume (8 IPOs) and down 43% by proceeds (US$0.9b) YTD 2020. Indian exchanges saw 16 IPOs, which raised US$1.4b YTD 2020, a decline of 61% by deal number and 9% decrease by proceeds. There was also one IPO each on the Malawi and Bangladesh exchanges, which raised US$29m and US$7m, respectively.
H2 2020 outlook: IPO rebound expected
Given the COVID-19 outbreak and its negative impact on global economic activities, in the short to medium term, governments around the world will continue to implement policies and stimulate economies against rising unemployment. At the same time, central banks will inject more liquidity into the financial systems. Both actions bode well for equity markets and IPO activity in 2H 2020.
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About the data
The data presented in the Global IPO trends: Q2 2020 report and press release is from Dealogic and EY. YTD 2020 (i.e., January-June) is based on priced IPOs as of 23 June 2020 and expected IPOs up to 30 June 2020. All data contained in this document is sourced from Dealogic, CB Insights, Crunchbase and EY unless otherwise noted.