India has an IPO pipeline of $9.5 billion in 2023, Kotak IB CEO Ramesh


16 January 2023

After higher activity in the deal street in 2022 led by biggest deal ever in the country of HDFC-HDFC Bank merger and largest acquisition in industrials space by Adani Group of Holcim's India Assets, S. Ramesh, the managing director and CEO of Kotak Investment Banking, is optimistic of Indian equity capital market in 2023 and expects 30 per cent more initial public offerings in 2023 and shift in allocations from China to India by private equity firms.

Excerpts from the interview:

Q. What is the outlook for Indian equity capital market in 2023?

A: Indian market outperformed 2022 in a challenging global landscape with India being the fifth best performing market in terms of equity fund raising of $16.4 billion across various geographies, the other four being China, USA, Germany and Canada. Equity fundraising is expected to reach pre-Covid levels of around $25 billion in 2023 given India is well positioned for growth and is expected to outperform emerging market peers in real GDP growth. Today, India has lowest corporate debt to GDP in over 7 years coupled with improving bank balance sheets. Foreign portfolio investor (FPI) inflows into India has been the highest among emerging markets over CY17 - CY22 despite outflows in CY22.

Q. What is the outlook for primary market in 2023?

A: We expect initial public offerings(IPOs) in calendar year 2023 to increase by 30 per cent driven by sectors such as pharmahealthcare, real estateREIT, INviT and consumer sector. IPO pipeline of $9.5 billion is awaiting launch and $6.6 billion has been filed with Securities and Exchange Board of India and is awaiting Sebi's approval. Retail participation in IPOs has been selective and will continue to be selective going forward as compared to CY21.

Q.The year 2022 saw drop in main board IPOs compared to 2021 but deal street was buzzing with private equityventure capital investments,which sectors attracted higher deals.

A: India Received $47 billion PE VC investments in CY22 through 1,226 deals vis-à-vis $17 billion foreign portfolio investor (FPI) outflows.There is a shift in allocation from China to India. Also private equity market has matured into a large and established segment in India with higher average deal size, more dry powder per firm, there are more domestic PE funds which, in turn, is attracting global funds to establish direct presence. Cumulative PE VC investments at $380 billion have overtaken cumulative FPI inflows of $155 billion since 2006 and continues to surge ahead. In terms of PEVC investments Digital and Enterprise Technologies are taking the lion’s share,while BFSI, Healthcare, Pharma & Consumer sector are other key areas. Investments in digital and consumer technologies multiplied four times in CY22 over CY16, infrastructure witnessed five times activity over CY16 and consumer and retail, healthcare, and BFSI witnessed two times deal activity over CY16.

Q: How do you look back at 2022 in terms of deal activity?

A: We saw augmented deal activity despite global economic slowdown in 2022. Last year we witnessed the biggest deal ever in the country of HDFC – HDFC Bank merger and the largest acquisition in industrials space by Adani Group of Holcim's India Assets, PVR - Inox merger, Bharti Airtel's 3.33 per cent stake sale by Singapore Telecom, to name a few.

Q Where India stands today in terms of investment banking activity ?

A. We are in middle of very interesting times when we look at investment banking in India today. We have become very formidable in terms of fees, equity capital market activities and advisory. In investment banking (IB) league table we are in top 4 in advisory table. India is taking decisive steps in deal activity and for next 5-10 years this activity is there to stay. I also feel optimistic about Indian manufacturing and made in India Apple phone shipping is a proud moment for India.

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