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Retail investment in IPO to be selective in 2023, says Kotak Bank arm

Informist, Thursday, Jan 12, 2023


MUMBAI – Retail participation in initial public offers was selective in 2022 as compared to 2021 and will remain selective going forward, said Kotak Investment Banking in a media interaction today. The investment banking firm, which is a subsidiary of Kotak Mahindra Bank, said that the December quarter of last year “saw subdued subscription levels.”

The investment banking firm expects to see a 30% increase in initial public offers in the current year, driven by sectors such as consumer, real estate and pharmaceutical, and securities such as real estate investment trusts and infrastructure investment trusts.


Of current initial public offer pipeline of $9.5 bln awaiting launch, and another $6.6 bln awaiting approval from Securities and Exchange Board of India, around $10 bln of offers will hit the market in the current year, up from $7.6 bln in 2022.


Recently, a few domestic mutual funds had gone on record saying returns from equity markets will not be good in the next couple of years and that short-term money may move to debt investments and not equities.


The equity market has entered into a corrective phase and is further stepping into an uncertain period in 2023, Mahesh Patil, chief investment officer at Aditya Birla Sun Life Mutual Fund said at Business Standard BFSI summit last month.


To a question on whether negative equity returns will deter investors from participating in equity initial public offers in the current year, a senior Kotak Investment Banking official said, “I am not saying that from the next month the equity IPO market will boom but the other side of the coin to look at is that maybe equity returns will have to come from newer IPOs.”


Issuers and selling shareholders will have to price carefully as it will be a buyer’s market, but this could be a blessing in disguise, the official said. “There will be opportunities for new companies…as mutual funds and foreign portfolio investors will be looking for newer stories.”


Currently, nearly all benchmark equity indices are in the red with regard to their one-year returns. The Nifty 50 is down 1.9% from a year ago while Nifty 500 is down 2.5%. S&P BSE IPO, an index tracking recently-listed companies, is also currently down by a steep 28% from a year ago.


Kotak Investment Banking also said that although there currently was a pause in public offerings of new-age and financial technology companies, deals were continuing to take place in the private space. There will be no rush among such companies to hit the initial public offer market since public investors had recalibrated their listing return expectations with the absence of profits in such companies leading to a fall in demand for such issues.  End


US$1 = 81.55 rupees


Reported by Rajesh Gajra

Edited by Aditya Sakorkar


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Source: Cogencis

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