Dalal Street analysts believe that rising volatility, poor financials and a muted response to companies in the IPO process and on debuts are key factors dampening sentiment among companies looking for fresh capital.
Amishi Kapadia, Global Head – Merchant Banking, Yes Securities said: “Global macroeconomic factors including rising interest rates, Fed and ECB tapering QE and situation in Europe due to Ukraine war have affected liquidity.”
“A high OFS share in many IPOs where existing owners exit loss-making companies does not instill confidence in public market investors,” she added.
Additionally, Venkatraghavan S, Managing Director and Head of Equity Markets, Equirus said that insufficient financials, insufficient demand and valuation mismatches are the key reasons for postponing the issue.
The secondary markets have been volatile recently and hence the demand for IPOs has been slow, he added. “Investors see attractive buying opportunities in selected listed stocks, so there must be compelling reasons to look at a new stock.”
The majority of companies taking a step back from their D-Street debuts include loss-making, cash-burning Internet companies or startups that have been heavily criticized for their valuations.
Anshul Mittal, head of investment banking, Mirae Asset Capital, said given the recent underperformance of technology companies in the new era, public market investors are now looking at companies with positive bottom lines and cash flows.
“The rising interest rate scenario in the west and geopolitical factors also remain a concern,” he added. “This means that companies that are not flexible in their valuations have no choice but to delay their releases.”
The list includes some big ticket sellers from tech-focused platforms like API Holdings (Pharmeasy), Byju’s, ANI Technologies (Ola), Oravel Travels (Oyo), Snapdeal and Droom among others.
Smaller brands and traditional companies like Stitched Textiles, Nandan Terry, SSBA Innovations, Macleods Pharmaceuticals and BGV India are also hesitant to enter the mainstream market citing various issues.
Market regulator Sebi has given its nod to at least 70 companies to raise over Rs 1 lakh crore in the primary market in the next 12 months.
VK Vijayakumar, Senior Investment Advisor at
said market conditions are not very favorable for large IPOs and this space has been unlikely.
“Rightly priced IPOs that leave something on the table for investors have performed well and are trading at a good premium to the issue price,” he said. “High price IPO is unlikely to get a good response in the market.”
The future of new age companies on D-gatu
Internet companies were buzzing in the post-pandemic era, and experts believe that some of the new age startups are disruptive and have a bright future. While the path to profitability is critical for D-Street’s debut, analysts said.
Equirus’ Venkatraghavan said investors will be closely watching companies’ growth trajectories. “I would also expect to see consolidation in the long term.”
Dalal Street has historically outperformed global markets, says Mirae Asset’s Mittal. “We see a positive future for these companies at Dalagata in the coming times if they expand without burning a lot of money.”
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)
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