IPO to witness muted activity while rights and QIPs to dominate capital markets this quarter

IPO to witness muted activity while rights and QIPs to dominate capital markets this quarter

Activity in the IPO market is expected to remain dormant, and only a few high-quality issuers will be able to tap the markets. India Inc., to cope with the fallout of the COVID 19 pandemic, is now looking at tap fundraising avenues through rights issues, as well as QIP offerings in the second half. 

Looking at the situation from the ECM deal pipeline perspective, we are now at a healthier place than where we were in March. FII buying in the last few weeks also indicates the liquidity in the market. Thus, despite the concerns around COVID 19, India is still attractive to FIIs. 

The COVID 19 pandemic has badly hit businesses all across the country, throughout industries. However, as compared to other sectors, the Indian financial service business has been more proactive when it comes to tapping the market to raise funds. There are of course exceptions, such as Reliance Industries Ltd. Lenders like HDFC Ltd, Axis Bank Ltd, Shriram Transport Finance Co Ltd, etc, that have announced their plans to raise funds. Others like ICICI Bank Ltd are also planning their capital raising initiatives. The previous month, Kotak Mahindra Bank and JM Financial raised capital through QIPs. 

In comparison to global markets, the Indian capital raising activity is focused on banks and NBFCs. And there is still a lot of potentials to strengthen balance sheets across sectors. Before raising equity, companies are trying to evaluate the impact of the lockdown. In comparison with other parts of Asia, Indian companies have been quick in raising capital during these tough times. 

Over the next few months, markets will see new themes emerge, such as the resurgence of rural growths and increasing demand, which will capture the attention of both the issuer and the investor. As per industry experts, fundraising activities will pick up after the results of Q1 are out. This will give investors clarity on the impact that the lockdown has had on company finances. 

Sectors like pharma, which have done well in the pandemic, will now be able to raise funds in the upcoming months. 

In recent weeks, fundraising activity has also picked up. This is of course on the back of SEBI relaxing fundraising constraints for listed companies. 

In the past 2-3 months, the regulator has taken many steps to make sure that it is easy for listed companies to access capital from shareholders, promoters, and other investors. These relaxations have been put in place to give companies a chance to tide over the strain that the pandemic has brought. 

This being said, SEBI needs to be alert and agile right now, to the funding needs of listed Indian companies. It will also have to act swiftly to accommodate situations that call for emergency funding.