- India records 22 IPOs in the first quarter with Indian stock exchanges (BSE and NSE including SMEs) ranking ninth globally in year-to-date 2021
New Delhi, 21 April 2021: India recorded 22 IPOs (US$2570.44m) in the first quarter of 2021 with Indian stock exchanges (BSE and NSE including SMEs) versus 12 IPOs at the same time last year. India ranks ninth globally in terms of the number of IPOs year-to-date (YTD) 2021 according to EY India IPO Trends Report: Q1 2021. Consumer products and retail, diversified industrial products, automotive and transportation were the most active sectors in the number of IPOs with five IPOs each in the former two sectors and four in the latter sector including the main and SME markets.
During Q1 2021, IPO by Indian Railway Finance Corp Ltd from the banking and capital markets sector was the largest, with an issue size of US$634 m. In the main markets (BSE and NSE), there were 17 IPOs in Q1 2021 versus 1 IPO in Q1 2020 and 10 IPOs in Q4 2020, representing an increase of 1,600% compared to Q1 2020 and an increase of 70% compared to Q4 2020.
In the SME markets, there were 5 IPOs in Q1 2021 versus 11 and 9 IPOs in Q1 2020 and Q4 2020, respectively, representing a decrease of 55% as compared to Q1 2020 and decrease of 44% as compared to Q4 2020.
Sandip Khetan, Partner and National Leader, Financial Accounting Advisory Services (FAAS), EY India said, “We are witnessing high momentum in the Indian capital markets. Significant amount of activity is driven by huge dry powder awaiting investment and companies exploring a listing in India or overseas. The markets continue to reward companies with robust, scalable and technology-led business models.”
SEBI has eased norms for start-up companies, minimum public offer and required public shareholdings for large issuers. The IPO pipeline has over 20 companies that have filed their Draft Red Herring Prospectus (DRHPs) and more than 30 PE-backed companies planning exits. InvITs worth almost US$5 billion are in the pipeline.
There are reasons for caution in the near-term, given the slow start to vaccinations in India relative to the size of the population, renewed spike in COVID-19 infections with the second wave and threats from new variants of the virus.
Attractive market conditions in 2021 so far have resulted in the best-performing first quarter by deal numbers and proceeds in the last 20 years. While Q1 is traditionally a slow quarter, this heightened activity bucks that trend. Just as traditional IPO markets have been highly active, the special purpose acquisition company (SPAC) IPOs in Q1 have also been breaking records, completing more deals and raising more in proceeds than in the whole of 2020. Through Q1 2021, the global IPO market saw 430 deals raising US$105.6b in proceeds, increasing by 85% and 271% year-on-year, respectively.
Americas IPO markets break records by deal numbers and proceeds in Q1 2021
IPO activity in the Americas region more than tripled by deal numbers compared with Q1 2020 with deals increasing 218% (121 IPOs) and proceeds raising an unprecedented 446% more, totaling US$45.2b. While the healthcare sector continued to lead the region by deal numbers through Q1, with 44 IPOs (raising US$8.7b), the technology sector accounted for the lion’s share of the region’s proceeds raising US$21.4b (via 33 IPOs).
As with the global market, the US tends to be slower in Q1. However, Q1 2021 saw deals being carried over from 2020 and issuers taking advantage of high valuations led by technology companies resulting in the US seeing 99 IPOs raising US$41.1b overall. The explosion of SPAC IPO activity continued into Q1 2021 with activity already surpassing the records broken in 2020. In Q1 2021, there were already three times as many SPAC IPOs on US exchanges than traditional IPOs, all while traditional IPO deal numbers skyrocketed as well. Through Q1 2021, the US saw 300 SPAC IPOs raise US$93.4b in proceeds.
Like the US, Brazil’s IPO activity continues to surge culminating in the country’s most active quarter since 2007. In Q1 2021, Brazil represented 12% of the region’s total IPO count with 15 IPOs raising US$3.5b.
Asia-Pacific IPO markets defied expectations, maintaining positive momentum
The Asia-Pacific region started the year by accounting for nearly half (47%) of the global IPO activities in Q1 2021. The region saw 200 IPOs raising US$34.3b in proceeds, achieving the highest Q1 proceeds in 20 years, beating the former record from Q1 2010. In terms of sector activity, technology outpaced all others by both volume (51) and proceeds (US$17.7b).
Greater China’s positive economic growth was reflected in its buoyant IPO momentum.
Despite a new review process instituted by Chinese regulators, Greater China saw a 51% increase in deals (133) and 121% increase by proceeds (US$28.9b) YOY.
Japan’s IPO activity remained steady as well, as funds continued to find their way to high-tech startups resulting in a healthy pipeline of IPO candidates. Overall Japan saw 20 IPOs raise US$1.0b in proceeds.
EMEIA’s IPO market sees increased momentum, optimism and unicorns through Q1
The EMEIA region got off to a strong start in Q1 2021 buoyed by the lingering momentum from Q4 2020. Sustained activity in the region can be attributed to high valuations, low volatility and rising confidence in an eventual economic rebound. Overall, EMEIA saw 109 IPOs, a 179% increase YOY. These deals raised US$26.1b in proceeds, a 646% increase YOY.
Europe stayed resilient, despite restrictions brought on by the COVID-19 pandemic, resulting in improved investor sentiment. European IPO activity rebounded in Q1 increasing deal numbers by 315% (83) and proceeds by 1,814% (US$23.1b). In the UK, investors sustained their appetites and companies took advantage of pandemic-accelerated growth and high levels of liquidity. The UK ended the quarter with 17 IPOs raising US$7.5b in proceeds, increasing 467% and 1,031%, respectively.
Q2 2021 outlook: uncertainties may saturate market volatility triggering a perfect storm
While sentiments are trending positive, uncertainties will continue to weigh, creating market volatility. The likelihood of new waves of the COVID-19 pandemic around the world combined with differing global vaccination progress, geopolitical tensions, inflation, interest rates and the ability of the global financial systems to withstand unexpected market shocks are all potential ingredients for a perfect storm. Whether a company decides to take the route of a traditional IPO, SPAC merger or a direct listing, well-prepared companies in popular sectors and with the right stories should move now to catch the transaction window while it’s still open.
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About the data
The data presented in the Global IPO trends: Q1 2021 report and press release is from Dealogic and EY. Q1 2021 (i.e., January-March) is based on completed IPOs as of 24 March 2021 and expected IPOs by end of March 2021. Data as of 25 March 2021, 9 a.m. UK time. All data contained in this document is sourced from Dealogic, CB Insights, Crunchbase and EY unless otherwise noted. Special purpose acquisition company (SPAC) IPOs are excluded in all data included in this report, except where indicated.