UBS expects record IPO year for India despite Covid-19 crisis

Bloomberg

India’s sharp surge in Covid-19 cases will not prevent the country’s markets from setting a record for initial public offerings (IPOs) in 2021, as a cohort of technology companies make their much-anticipated debuts later in the year, according to UBS Group AG.
Last year companies amassed $4.6 billion from IPOs, according to data compiled by Bloomberg, and Anuj Kapoor, head of investment banking at UBS India, believes the figure will be easily eclipsed.
“I would say we will surpass twice the money we raised in 2020 through IPOs,” 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 looking for new ideas to invest in, Kapoor said.
The latest outbreak of Covid-19 cases has had a serious 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 risen 2.2% this year, compared to the 9.3% gain year to date in the MSCI World index.
Overseas investors sold $1.4 billion worth of Indian stocks in the month to April 29, the biggest monthly outflow since March last year when the nation imposed one of the strictest lockdowns in the world to curb the spread of the pandemic.
“We will see a few more tough weeks ahead before Covid-19 plateaus and starts declining,” said Kapoor, who is also on the board of UBS India. “Hopefully, this should not linger beyond June.”
Kapoor expects tech companies to start hitting the market in the second half of the year. He predicts fewer than five will list this year, however that figure could more than double in 2022.
On the mergers and acquisitions front, Kapoor sees more deal activity from local companies and foreign players buying Indian firms than in domestic firms targeting assets overseas.
Global private equity funds have a strong interest in the health-care and pharmaceutical sectors, he said.
Last year saw KKR & Co. buy a majority stake in JB Chemicals & Pharmaceuticals Ltd. in a $371.3 million deal that completed in November. A month earlier, Carlyle Group Inc. closed a transaction to acquire a 20% interest in Piramal Pharma Ltd for $466 million.
Locally, some of the largest investors in tech companies will push the firms toward consolidation.
“We are going to see this theme play out as business models mature,” he said. He also sees combinations occurring in areas such as financial services.
Kapoor’s bullishness stems from his unit’s performance in 2020, UBS’s best year ever in India by revenue, driven primarily by equities activity, he said. The firm added new junior banker roles in March, and will recruit 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.”