Upcoming IPOs can add $160 billion to m-cap: Credit Suisse

Mumbai: Upcoming initial public offerings (IPOs) could add another $160 billion (over Rs 11.8 lakh crore) to India’s overall market capitalisation over the next 12-18 months, excluding Life Insurance Corporation of India, Credit Suisse said in the wake of strong equity fundraising via IPOs this year.

“As non-IPO public equity raising is still low, and retail/mutual fund flows are strong, absorption of this paper is unlikely to be a challenge,” said Credit Suisse. “The non-offer for sale portion of these funds could help offset the risk capital erosion during lockdowns and help revive growth.”

The Swiss brokerage said that the upcoming public issues could be largely in discretionary and financial segments.

IPOs have helped raise $9.7 billion ( Rs 72,755 crore) this year, the second-highest fundraising in a calendar year, with five months still to go and draft prospectuses being filed for $12 billion (Rs 89,000 crore). These IPOs have added $50 billion (Rs 3.71 lakh crore) to India’s market cap.

The high number of IPOs are offsetting the weakness in qualified institutional placements and rights issues, said Credit Suisse.

The brokerage said private equity fundraising has hit a record high of $18.6 billion in the first half of 2021. Public market activity has lagged again this year but IPOs are on track for a record year, it said.

The brokerage said fundraising in the past few years has been dominated by financial firms.

“While this can have a multiplier effect on growth, as banks/non-banking financial companies lever up to give capital, this has so far only served to reduce leverage in financials or replenish capital bases hurt by the last cycle’s bad loans,” said Credit Suisse.

Funds raised by non-financial companies can impact gross domestic product in the near term, triggering investment as well as consumption, it said.



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