IPO fundraising more than doubles to Rs 45,000 crore in 2020: KIB

Kotak Investment Banking (KIB) said the amount may exceed Rs 50,000 crore as well if the government launches life insurance behemoth LIC's IPO next year
Strong markets led to a 2.25 times jump in the initial public offerings in 2020 to Rs 45,000 crore, and a strong pipeline of issuances may help the figure to exceed Rs 50,000 crore next year, a leading merchant bank said on Monday.

 
The companies had raised Rs 20,300 crore through IPO route in 2019.

 
Kotak Investment Banking (KIB) said the amount may exceed Rs 50,000 crore as well if the government launches life insurance behemoth LIC's IPO next year, its head of equity capital markets V Jayasankar told reporters.

 
A "restructuring" exercise is on at LIC and it will take 3-4 months for clarity to emerge on the issue, he added.

 
Jayasankar said the strong IPO issuances, coupled with rights issues like Reliance Industries' or the deals into the leading corporate's telecom and retail ventures, and Covid capital raising by banks helped the merchant banking fees grow by over 30 per cent to $ 800 million.

 
It can be noted that many watchers have expressed concern over a disconnect between the real economy and the buoyant markets, which are witnessing one of the strongest rallies ever after an initial sell-off. Investors justify the enthusiastic buying, saying they are taking a longer-term view of the Indian economy.

The company estimated the overall yearly deal pie will exceed $1 billion in the next two years, despite the economic climate being very challenging because of the pandemic.

 
Equity capital market activity like IPOs and rights issues accounted for 37 per cent of the total fee pool as against 35 per cent in 2019, followed by private equity that accounted for close to 37 per cent compared to last year's 43 per cent, while merger and acquisition were at 26 per cent, up from 22 per cent.

 
When asked about pricing of IPOs, considering the doubling of scrips on debut like Burger King's on Monday, Jayasankar defended the pricing strategies saying they are based on fundamental calls, while it is technical which drive interest in a stock to such level.

 
Despite the $16.3 billion fundraise by Mukesh Ambani's ventures, the overall activity stood at $ 33 billion, a shade lower than the $35.8 billion in 2019, KIB said.

 
Officials explained that private equity investors take a long-term view of the country and concentrated on investee companies over newer deals in 2020.

 
Reliance Industries' deals dominated the foreign and domestic M&A market as well, on the back of the investments in Jio and Retail, and also the acquisition of a majority of stake in Future Group, KIB said.

 


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