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India equity sales hit record high even as Covid-19 upends IPOs


Equity fundraising by India’s listed companies has hit a record high in 2020, even as initial public offerings ran dry due to the coronavirus pandemic upending operations at businesses that had sought a market debut.

Companies in Asia’s third-largest economy have raised $33.3bn since the start of the year, according to Dealogic data, as a rebound in local stocks from the Covid-19 crisis encouraged Indian firms to sell shares.

That bumper haul is despite it being a miserable year for Indian IPOs, with companies having raised just $2.1bn across 18 deals, marking the lowest ebb for the country’s primary markets in half a decade. However, 52 follow-on offerings have raised $30.2bn in the year-to-date, Dealogic data showed.

IPO activity In India fell silent after the $1.4bn listing in March of SBI Cards, the credit card arm of the State Bank of India, as authorities introduced a harsh nationwide lockdown in an attempt to contain the spread of Covid-19. The number of new listings in the quarter to June fell 80 per cent compared with a year ago, according to EY.

“Whenever you have a pandemic of this size and you don’t know how to assess the impact — of course the primary markets are the first to feel the turbulence,” said Sunil Khaitan, India head of global capital markets at Bank of America.

He added that companies in areas such as infrastructure and hospitality had delayed plans to launch IPOs in 2020.

Column chart of Funds raised from share offerings ($bn) showing India IPOs evaporate as follow-on offers thrive in pandemic

The dearth of big stock market debuts stands in contrast to other Asian markets, such as Hong Kong and mainland China, where companies have taken advantage of a powerful recovery in equities to raise billions of dollars in primary and secondary offerings.

But analysts point out that the situation in India highlights a gulf between market leaders, which have been able to keep tapping investors, and younger companies that are largely shut out of markets.

Reliance Industries, India’s largest company and owned by its richest man Mukesh Ambani, in June completed a $7bn rights issue, the country’s biggest ever.

Lenders including Kotak Mahindra, SBI and ICICI also sourced billions from investors after the central bank ordered them to shore up their capital bases.

“The big get bigger, the strong get stronger, and they continue to gain market share at the expense of smaller companies,” said Prabodh Agrawal, a former executive at an Indian financial group.

Traders, however, point to signs that IPO activity may be stirring again as a 50 per cent rebound in India’s Sensex index since March has lured an influx of retail investors.

“There’s a mad scramble,” said H Nemkumar, head of institutional equities at IIFL. Some smaller businesses, such as Bangalore-based IT firm Happiest Minds, are pushing ahead with listings even as the country averages about 90,000 new coronavirus infections daily.

Some larger companies are moving more slowly on IPOs for now. Life Insurance Corporation of India — a government-owned insurance company that could raise up to Rs1tn ($13.6bn) and would be the country’s largest listing in years — is not set to debut until at least 2021.



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