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UBS expects India to set record IPO year despite Covid-19 crisis

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India’s visible hike in Covid-19 cases will not stop the markets from achieving a record for IPOs in 2021, as a clutch of tech firms make their debuts later in the year, according to UBS Group AG.

Last year companies raised $4.6 billion from IPOs, according to data gathered by Bloomberg, and Anuj Kapoor, head of investment banking at UBS India, thinks the value will be surely surpassed.

“I would say we will surpass twice the money we raised in 2020 through IPOs,” Kapoor said.

Prior to the second wave of the pandemic, the country’s markets were full of enthusiasm. So far in 2021, Indian IPOs have accumulated almost $3 billion, the best start to the year since 2018, the data reveal. The activity was supported by sufficient liquidity, with foreign investors, as well as retail stock-pickers, eyeing new ideas to invest in, Kapoor said.

Before the arrival of the coronavirus pandemic’s second wave, India’s markets were full of optimism. So far in 2021, IPOs in India have raised nearly $3 billion, the best start to the year since 2018, the data show. The activity was aided by ample liquidity, with foreign investors, as well as retail stock-pickers, eyeing new ideas to invest in, Kapoor said.

The recent surge in Covid-19 cases has had a severe impact on the equities market, and there has been a decoupling of Indian versus global markets since March, Kapoor said. The benchmark Sensex index has increased 2.2% this year, compared to the 9.3% gain year to date in the MSCI World index.

Foreign investors traded $1.4 billion worth of Indian stocks in the month to April 29, the largest monthly outflow since March last year when the country imposed one of the most stringent lockdowns in the world to restrict the spread of the pandemic.

Kapoor foresees tech companies to start hitting the market in the latter half of the year. He predicts less than five will list this year, however that figure could more than double in 2022.

Zomato Ltd. recently filed its initial prospectus with SEBI for an IPO that could raise around 82.5 billion rupees. Other tech-based businesses waiting for approval include Nykaa E-Retail Pvt and Policybazaar.

Global private equity funds have a big interest in the healthcare and pharmaceutical sectors, he said. Last year, KKR & Co. acquired a majority stake in J.B. Chemicals & Pharmaceuticals Ltd. in a $371.3 million deal that closed in November. A month before, Carlyle Group Inc. concluded a transaction to hold a 20% interest in Piramal Pharma Ltd. for $466 million.

Kapoor’s bullishness arises from his unit’s performance in 2020, UBS’s best year ever in India by revenue, fueled essentially by equities activity, he said. The firm added new junior banker roles in March, and will hire talent judiciously, he said.

“This year we will have a healthy mix of capital markets and M&A,” he said. “2021 should be better for deal activity than 2020.”

2021 started as a great year for Indian companies but things quickly went south with the second wave of the COVID pandemic. Hopefully, the market would jump back and companies would be able to proceed with their IPOs.

Shishir Gupta, Founder and CEO, StartupLanes

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