IPOs in India likely to raise $5 billion in 2016: EY

Initial Public Offerings (IPOs) in India are set to hit a six-year high in 2016, and estimated to raise over $5 billion, says an EY report.

In the March quarter of 2016, India was ranked among the top six countries in terms of number of deals globally and the BSE was featured among the top six exchanges in terms of funds raised within Europe, West Asia, India, and Africa, which amounted to $197 million from eight deals.

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The deal traction witnessed in the March quarter is likely to continue in the coming months as well, largely due to positive sentiment on growth, government's plans to sell stake in state-owned enterprises and a robust pipeline built up over the past six years.

"IPOs in India are set to hit a six-year high in 2016 as the companies looking to go public, supported by a growing appetite for equities and an uptick in economic growth, are estimated to raise more than $5 billion," EY said.

Meanwhile, global IPO activity slowed significantly in the first quarter of 2016 with a total of 167 deals raising just $12.1 billion, registering a 39% drop in number of deals and a 70% decline in total capital raised as compared to the same period last year.

"2016 has already started on a positive note, with six IPOs having raised around $375 million in the first quarter. A number of firms have already received Sebi (Securities and Exchange Board of India) approval and we could see successful IPOs from some of these during the year," said Amit Khandelwal, national director and partner, Transaction Advisory Services, EY.

He said that the general sentiment for the IPO fund raise would remain positive for the rest of the year and closely track the general economic and investment environment and private equity exits would continue to be the dominant theme in 2016.

"Divestment are expected to be another contributing factor to IPO market with the government looking to list the profitable PSUs (public sector units), notably the insurance majors. Financial services (microfinance, payments banks), ITeS (information technology-enabled service), life science and automotive are expected to be the more active sectors," Khandelwal said.

Meanwhile, in 2015, the Indian IPO market saw significant momentum after a gap of nearly four years when 21 firms raised over $2 billion from the markets.

2015 saw increased number of private equity backed firms successfully accessing the IPO market driven by the need for the companies to provide exit to the investors.

"The other key positive aspect was the re-emergence of large issues with the average size of the IPO getting close to $100 million, mark with nearly dozen companies raising over $75 million," Khandelwal said.