ipo market news: Despite Indian market resilience, why IPO-bound firms are deferring issues – Blue Barrows

New Delhi: While the primary market is showing signs of recovery, a full-fledged IPO season is still some time away. A number of companies are either withdrawing their IPO papers or deferring their issues, shows data. Some of the companies have Sebi’s observations, which are likely to expire in the next few weeks, but they still haven’t announced their IPOs.

Dalal Street experts believe that rising volatility, poor financials and muted response to companies during the bidding process and on debut are key factors denting the sentiments of companies looking to raise fresh capital.

Amishi Kapadia, Global Head – Merchant Banking, Yes Securities said, “Global macro factors including rising interest rates, Fed and ECB tapering of QE and situation in Europe due to Ukraine war have affected liquidity.”

“High OFS component in many IPOs with the existing holders exiting loss-making companies, fails to inspire confidence in public market investors,” she added.

Adding to it, Venkatraghavan S, Managing Director & Head- Equity Capital Markets, Equirus said that stale financial numbers, inadequate demand and valuation mismatch are key reasons for deferment of the issues.

The secondary markets have been volatile lately, which is why the demand for IPOs has been slow, he added. “Investors see attractive buying opportunities in select listed stocks, so there have to be compelling reasons to look at a new stock.”

The majority of the companies taking a step back from their D-street debuts include loss-making and cash-burning new-age internet companies or startups, which have been highly criticised for their valuations.

Anshul Mittal, Head – Investment Banking, Mirae Asset Capital said given the recent underperformance of the new-age tech companies, public market investors are now looking at companies with the positive bottom line and cash flows.

“Rising interest rate scenario in the west and geopolitical factors also remains a concern,” he added. “This means that companies who are not flexible on valuations have no option but to defer their issues.”

The list includes some big ticket IPOs from tech-focussed platforms like API Holdings (Pharmeasy), Byju’s, ANI Technologies (Ola), Oravel Travels (Oyo), Snapdeal and Droom among others.

Smaller issues and traditional companies like Stitched Textiles, Nandan Terry, SSBA Innovations, Macleods Pharmaceuticals and BGV India are also hesitant to hit primary markets, citing various issues.

Market regulator Sebi has given its approval to at least 70 companies to raise over Rs 1 lakh crore through the primary market in the coming 12 months.

VK Vijayakumar, Chief Investment Strategist at

said that the market situations are not very favourable for the large IPOs and this space has been a mixed bag.

“Rightly-priced IPOs which leave something on the table for investors have done well and are trading at a good premium to issue prices,” he said. “High-priced IPOs are unlikely to get good response in the market.”

Future of new-age companies on D-street
Internet companies were in buzz in the post-pandemic era and experts believe that some of the new-age startups are disruptors and have bright futures. Though the path to profitability is paramount for D-Street debut, experts said.

Venkatraghavan from Equirus said investors will be keenly watching the growth trajectories of companies. “I would also expect to see consolidation over the longer term.”

Dalal Street has historically replicated the global markets, says Mittal of Mirae Asset. “We see a positive future for these companies at Dalal street in times to come, if they scale up without burning much cash.”

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)