IPO Activities Expected to Gain Momentum in 2019 - A Report by EY India

EMEIA — India market insight

IPO activities are expected to gain momentum in 2019 “IPO activities in India have dropped significantly as compared to Q3 of 2018 on account of market corrections and various other domestic and global factors. Companies are adopting a “wait and watch" policy and at the same time preparing and filing DRHP with the regulator, so that when the timing is right, they can launch their IPOs immediately” Sandip Khetan Partner and National Leader Financial Accounting Advisory Services (FAAS), EY India

Global IPO trends: Q4 2018 | Page 1

EMEIA — India IPO market insight

Highlights from the market ►

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Indian Stock exchanges (BSE and NSE including SMEs) ranked second in the world In terms of number of IPOs for the period from January 2018 to November 2018.

In the main markets (i.e., BSE and NSE), there were only two IPOs in Q4 2018 versus nine IPOs and three IPOs in Q4 2017 and Q3 2018 respectively. This represents a significant drop of 78% and 33% as compared to Q4 2017 and Q3 2018 respectively.

Similar trend was witnessed in the SME markets too. There were eight IPOs in Q4 2018 versus 31 IPOs and 42 IPOs in Q4 2017 and Q3 2018 respectively, representing a significant drop of 74% and 81% as compared to Q4 2017 and Q3 2018 respectively.

The drop in IPOs may be attributed to reasons like significant corrections in the stock markets in mid cap and small cap stocks. Further the amount of volatility has increased due to uncertainties around global growth compounded by the ongoing US/China trade wars.

Markets

Activity Q4 2018 Change on prior year

YTD 2018

161

6%

IPOs

$5.52b

53%

Proceeds

$2.3m

5%

median deal size

10

Main markets

Change on prior year quarter

Q4 2018

2

78%

IPOs

$0.30b

95%

$2.2m

33%

SME markets

$140.86m

20%

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Industrial sector (construction and engineering) is the most active sector in terms of number of IPOs, whereas financial sector is at the top in terms of issue proceeds.

median deal size

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During 2018 there were no significant Indian companies that got listed on overseas stock exchanges.

40

Companies have adopted “wait and watch” policy, since companies are continuing to file the DRHPs with the regulator, with an intention that when the timing is right, companies can launch their IPOs with minimal time and effort.

20

Proceeds

8

92%

$1.75m

25%

Proceeds

median deal size

$10,000 $8,000 $6,000 $4,000

30

10

$2,000 $-

0 2016

2017 YTD 18 Proceeds US$m

160

$700

140

$600

120

$500

100

$400

80

$300

60 40

$200

20

$100

0

$0 2014

2015

2016

Number of IPOs

Sectors

by highest number of IPOs

Industrials 4 IPOs $57.26m Retail 2 IPOs $ 3.5m

IPOs

largest by proceeds

2017

YTD 18

Proceeds US$m

All amounts in table are in US$

Bombay & National Main Market

IPO pricing and performance

Aavas Financiers Limited $234.86m Finance

Garden Reach Shipbuilders & Engineers Ltd $46.95m Industrials

Bombay & National Stock Exchange - SME Market

$12,000

2015

74%

$0.02b

Bombay & National - Main Market

Number of IPOs

Change on prior year quarter

Q4 2018

IPOs 95%

2014

75%

IPOs

median deal size

$0.28b

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Q4 2018

Proceeds

In addition, there are a number of macro-economic factors which are contributing uncertainties such as, liquidity crises among non-bank lenders triggered by defaults done by a leading infrastructure finance company in India and currency volatilities (depreciation of rupee).

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Change on prior year quarter

Marine Electricals (India) Limited $5.1m Retail

First-day average return

-8.38% Share price development since IPO

-11.17% + or – indicates change compared to offer price at IPO

Equity index BSE SENSEX +6.9% India

All amounts in table are in US$. + or – indicates change since 1 January 2018

All values are US$ unless otherwise noted. | Q4 2018 and YTD 2018 refer to the fourth quarter of 2018 and cover priced IPOs from 1 January to 30 November.

Global IPO trends: Q4 2018 | Page 2

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Sandip Khetan Partner and National Leader Financial Accounting Advisory Services (FAAS), EY India sandip.khetan@in.ey.com Jigar Parikh Partner Financial Accounting Advisory Services (FAAS), EY India jigar.parikh@in.ey.com Veenit Surana Director Financial Accounting Advisory Services (FAAS), EY India veenit.surana@in.ey.com

Š 2018 Ernst & Young Associates LLP. Published in India.

All Rights Reserved.

EYIN1812-013 This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

All values are US$ unless otherwise noted. | Q4 2018 and YTD 2018 refer to the fourth quarter of 2018 and cover priced IPOs from 1 January to 30 November.

Global IPO trends: Q4 2018 | Page 3