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
Ernst & Young Associates LLP EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young Associates LLP is one of the Indian client serving member firms of EYGM Limited. For more information about our organization, please visit www.ey.com/in. Ernst & Young Associates LLP is a Limited Liability Partnership, registered under the Limited Liability Partnership Act, 2008 in India, having its registered office at 22 CamacStreet, 3rd Floor, Block C, Kolkata –700016
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