Private equity-backed companies likely to keep IPO market fully active in 2022 as well

5 January 2022
4 mins read
Private equity-backed companies likely to keep IPO market fully active in 2022 as well

IPOs in Calendar Year 2021

In 2021, more IPOs were announced than in the previous three years combined. Over 60 companies raised over Rs. 1.35 Lakh Crores through IPOs in India, which is the highest amount in the history of the country’s capital market.

In the last 12 months, new listings have given 60% average returns which is double the 30% returns given by Nifty 100 and BSE 500 indices.

What pushed the IPO Market in 2021?

Various market emotions like fear of missing out (FOMO), there is no alternative (TINA), fear and greed led to the rise of IPOs in the past year. As the markets rallied to make newer highs, the investors did not want to miss the early entry to make the most out of it.

The other factors like high liquidity, market rally have also made the investors jump in enthusiastically on the IPO ride. Among the top ten search terms on Google India included Grey Market Premium and IPO allotment status.

The trend in India’s Capital Market

The recent Indian Stock Market trend indicates that the investors are beginning to bifurcate the companies based on their business models, management teams, and other categories. This trend might get consolidated in the calendar year 2022 onwards as the honeymoon period ends.

Private equity funds are now finding their way to the public markets in India. The list of these private firms longing to get listed on the stock exchanges is long enough to last through the calendar year 2022 and beyond.

Industries in Highlight

In the past year, we have seen many technology private firms making it to the list of publicly listed companies successfully. Apart from new-age tech companies, this space is also likely to see new listings from healthcare, specialty chemicals, financial services firms, and companies manufacturing electric vehicles.

In addition to that, the gaming companies with good user traction will also be considered for listing. The gaming industry in India has grown at a robust rate of 40% in the past year, which is more than the 25% growth of the overall market. With a growing investor interest, more than a third of the gaming industry’s funding came from the first quarter of 2021.

The rise of e-commerce in India will create new models that will appeal to sophisticated investors. Several new Indian tech companies are planning on targeting the US and Southeast Asia.

The Journey Ahead

In the coming period, many foreign investors intend to invest in Indian MNCs and create value enterprises. While the tech companies in the US account for about 25% of the country’s total market capitalization, their presence is far less in India.

The stock market regulator’s role in pushing policies for the new-age tech companies is widely acknowledged. With the increasing acceptance of tech investors and the steady growth of India’s tech industry, the debate on the overseas listing for tech is over.

India’s continued support is necessary for tech companies wanting to list their products in the country. An issue with a product or a performance issue can happen quite often.

The environment surrounding these companies will affect their business models. SEBI must ensure and take the necessary steps to keep a watch that the safety of the companies is not jeopardized.

FAQs

What are Nifty 100 and BSE 500?

Nifty 100 represents the top 100 companies listed on the National Stock Exchange whereas BSE 500, as the name suggests, is an index representing the top 500 companies listed on the Bombay Stock Exchange. These companies belong to different major sectors and are selected based on the value of their market capitalization.

What do PE-back companies mean?

PE-backed companies mean private equity-backed companies. Private equity is a type of alternative financing that enables investors to acquire private companies. It is usually carried out through the purchase of public companies. So the companies with private investments are called PE-backed companies.

What are the various sectors that are likely to come up with an IPO in 2022?

In the calendar year 2022 and beyond, we are likely to see IPOs from companies belonging to sectors like electric vehicles, financial services, gaming, healthcare, real estate, etc.

Source: Economic Times

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.