Iran conflict jolts Indian IPO market, threatens slowdown after two record years

The rout in Indian equities following the outbreak of war in the Middle East is the latest hurdle facing Indian companies looking to go public, raising the prospect of a prolonged slowdown in issuance after two record-breaking years. Potential issuers now have to contend with heightened volatility denting investor appetite and clouding visibility on valuations. Indian companies raised $1.5 billion this quarter from initial public offerings, compared with $2.3 billion in the same period last year, according to data compiled by Bloomberg. It’s the latest sign that one of the world’s hottest venues for IPOs is cooling as concerns mount over an economic slowsown, foreign outflows and a weak currency. Local stocks lag Asian peers after their worst January in a decade. Several companies came to the market with downsized deals and new stocks often showed lackluster performance. Clean Max Enviro Solutions Ltd., which debuted on Monday, is trading about 20% below its IPO price. “Although not many issues are planned for March, it is natural that concerns around the war, rising oil prices, the economic impact and inflation will affect market sentiment,” said V. Jayasankar, managing director at Kotak Investment Banking. “Issuers are likely to adopt a wait-and-watch approach until markets show clearer signs of stability.” While only a handful of offerings were scheduled for March, sentiment has turned cautious as investors gauge the impact of the conflict. The benchmark NSE Nifty 50 Index slipped as much as 2.3% on Wednesday, taking its slump this year close to 7%. Even so, deal activity has not come to a halt. SEDEMAC Mechatronics Ltd.’s 13.52 billion-rupee ($147 million) IPO opened on Wednesday, while the National Highways Authority of India’s infrastructure investment trust is preparing to launch a 60 billion-rupee ($651 million) offering on March 11. Rajputana Stainless Ltd. is set to open a smaller share sale on March 9, and Blackstone-backed Bagmane Prime Office REIT is planning to raise about 40 billion rupees through an IPO this month. Foreign institutional investors have invested nearly 70 billion rupees ($759 million) in IPOs, suggesting selective appetite for primary offerings. Still, they have sold shares worth about 212 billion rupees ($2.3 billion) in the secondary market. And the performance of IPOs in India this year has been largely underwhelming, adding to concerns over the strength of the primary market. Six of the nine mainboard IPOs completed so far are trading below their offer prices. Bankers said prolonged delays may be unlikely if volatility eases. Jayasankar noted that markets tend to adjust quickly to geopolitical developments and shifting realities. Once there is greater clarity and stability, confidence is expected to gradually return, paving the way for deal activity to resume. Disclaimer: This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content. Also read: NHAI’s infrastructure investment trust eyes $656 million amid mixed listing market