The better the question. The better the answer. The better the world works. У вас есть вопрос? У нас есть ответ. Решая сложные задачи бизнеса, мы улучшаем мир. У вас є запитання? У нас є відповідь. Вирішуючи складні завдання бізнесу, ми змінюємо світ на краще. Meilleure la question, meilleure la réponse. Pour un monde meilleur. 問題越好。答案越好。商業世界越美好。 问题越好。答案越好。商业世界越美好。

IPO readiness survey

Factors driving a successful IPO in India

Indian IPOs make their presence felt globally

Recorded the highest IPO activity in terms of number of deals across the globe

Overall, 1H18 India IPO activity was at a comparably higher level and saw 90 IPOs raise US$3.9 b driven by solid activity in 1Q18. This was 27% and 28% higher than 1H17 activity in terms of number of deals and proceeds, respectively.

However, activity slowed down in 2Q18 primarily owing to increased volatility in the stock markets. 2Q18 saw 36 IPOs raise US$1.7 b which was 33% and 24% lower than 1Q18 in terms of number of deals and proceeds, respectively. This was mainly due to the sharp correction in the last couple of months, thereby wiping out whatever gains the fresh issues had garnered.

Globally, Indian exchanges recorded the highest IPO activity in terms of number of deals accounting for 14% of total deals in 2Q18 and 16% of deals in 1H18. In terms of proceeds, Indian exchanges accounted for 5% of global proceeds in both 2Q18 and 1H18.

Data includes effective IPOs as of 31 May 2018 and expected IPOs as of 30 June 2018. Source: Dealogic, EY research

IPO forecast - Domestic investors to ensure sunshine on the India IPO market

Stripping away the volatility driven by global factors, steady investor confidence and the rise in domestic capital participation in the equity markets shall keep the IPO market positive

Several companies have lined up for IPO plans worth US$5 b in the coming months, consequently the prospects for Indian IPO activity are bright for the rest of year. The stock market is seeing a lot more volatility this year and thus the windows for deals will get shorter as compared to last year. Also, a certain level of uncertainty surrounding the next year’s general elections may impact the overall IPO activity in the country.

However, going by the response last year, the deal sizes are expected to get larger. Inflows of domestic capital remains strong leading to many opportunities for companies to take the IPO route.

Financial sector, infrastructure and consumer companies with strong growth continue to be favourable. The rising renewable energy industry is likely to witness a surge in IPO activity as they look to tap the country’s capital markets. We do expect some pressure on deals in sectors where companies have failed to deliver earnings or are prone to corporate governance concerns.

The outlook for the rest of 2018 looks positive, driven by relatively stable equity markets and sound corporate earnings. However, it needs to be noted that while the micro is improving / expected to improve, the macro is facing headwinds.

In general, India should continue its IPO boom due to the resilient nature of the economy, strong domestic liquidity and a strong pipeline of DRHPs filed with SEBI.

EY IPO sentiment radar

Our radar contains a variety of market factors that may impact investor sentiment for IPOs.

Pre-IPO companies should analyze how these factors may affect their business and ultimately their impact on the timing and value of their transaction in view of their chosen IPO destination.

EY - Potential impact
EY IPO sentiment radar

IPO survey analysis

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EY - Brighter earnings outlook and stability in equity markets is the primary driver of improvement in IPO market sentiment

Brighter earnings outlook and stability in equity markets is the primary driver of improvement in IPO market sentiment

EY - Cash flow, ROE and other earnings ratio are three most important financial factors while evaluating an IPO

Cash flow, ROE and other earnings ratio are three most important financial factors while evaluating an IPO

EY - Brand strength, market position and management experience are the most important non-financial factors while evaluating an IPO

Brand strength, market position and management experience are the most important non-financial factors while evaluating an IPO

EY - Corporate governance and compliance is an essential requirement for companies looking to go public

Corporate governance and compliance is an essential requirement for companies looking to go public

EY - Majority of PE and Non-PE respondents consider listing venue as an important investment decision

Majority of PE and Non-PE respondents consider listing venue as an important investment decision

EY - Liquidity, confidence and good corporate governance drive exchange choice

Liquidity, confidence and good corporate governance drive exchange choice

EY - Cross-border listing challenges include managing corporate governance and having a compelling reason

Cross-border listing challenges include managing corporate governance and having a compelling reason

EY - Good quality companies coupled with attractive pricing and right timing are the key success factors for an IPO

Good quality companies coupled with attractive pricing and right timing are the key success factors for an IPO

EY - Issuer not having the right management and overpricing of stock at IPO are the biggest concerns for respondents

Issuer not having the right management and overpricing of stock at IPO are the biggest concerns for respondents

EY - PE-firms consider company’s growth opportunity as the primary factor that attracts investors to new listings

PE-firms consider company’s growth opportunity as the primary factor that attracts investors to new listings

EY - PE-firms recommend listing on main market rather than junior markets

PE-firms recommend listing on main market rather than junior markets

EY - Having a “Big 4” accounting firm as the auditor is an important criteria for investment

Having a “Big 4” accounting firm as the auditor is an important criteria for investment

EY - Successful public companies deliver on promises as recommended by PE respondents

Successful public companies deliver on promises as recommended by PE respondents

EY - US and India are the preferred markets to raise funds

US and India are the preferred markets to raise funds

EY - Nearly 70% of non-PE respondents consider medium term horizon to list keeping pre-IPO preparations in mind

Nearly 70% of non-PE respondents consider medium term horizon to list keeping pre-IPO preparations in mind

EY - Non-PE respondents consider PE backed companies as better IPO candidates

Non-PE respondents consider PE backed companies as better IPO candidates

EY - PE companies provide strategy and other insights in addition to funding as per Non-PE respondents

PE companies provide strategy and other insights in addition to funding as per Non-PE respondents

Download

PE firms video

Find out the views by private equity firms on driving a successful IPO in India

Non-PE firms video

Find out the views of non-private equity firms on driving a successful IPO in India

Contact us

EY - Sandip Khetan

Sandip Khetan

Partner and National Leader
Financial Accounting Advisory Services
EY - Vish Dhingra

Vish Dhingra

Partner
Financial Accounting Advisory Services
EY - Veenit Surana

Veenit Surana

Director
Financial Accounting Advisory Services

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