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Markets

India sees record IPOs in first half as companies raise $3.9 bn

Momentum likely to continue in rest of 2018, E&Y says

India saw a 27% jump in listings at 90 IPOs between January and June.   © AP

MUMBAI (NewsRise) -- India had the highest number of initial public offerings in the first half of this year, with companies raising as much as $3.9 billion and the nation is likely to keep the momentum for the rest of 2018, Ernst and Young said.

India saw a 27% jump in listings at 90 IPOs between January and June, as companies tried to take advantage of the liquidity in the markets on the back of a solid 2017, E&Y said in a report. The country accounted for 16% of the total IPOs across the world, and 5% of the global proceeds during this period, it said.

The IPO market in Asia's third-largest economy has been buoyant in the past few years, with fund raising reaching a record high of $11 billion in 2017. The boom extended into this year as foreign investors poured billions of dollars into India amid expectations of more economic reforms from Prime Minister Narendra Modi's government. Overseas investors pumped in $2.2 billion into local stocks between January-March. A normal monsoon that would help boost farm incomes this year also spurred investor interest.

So far into the year, the listings included some of the marquee names such as ICICI Securities, the country's largest stock broker owned by ICICI Bank, and state-owned military aircraft maker Hindustan Aeronautics.

"Stripping away the volatility driven by global factors, steady investor confidence and the rise in domestic capital participation in the equity markets shall keep the IPO market positive," said Sandip Khetan, national leader and partner at E&Y.

According to E&Y, the sectors with the highest number of IPOs included industrials, consumer staples, materials, consumer products, and technology. The consulting firm expects another $5 billion worth of IPOs to be lined up in the coming months.

A sector that is likely to witness a surge in IPOs this year is renewable energy. Several clean-energy companies, including ReNew Power, India's biggest renewable energy company, the Indian unit of Singapore-listed Sembcorp Industries, and ACME Solar Holdings have already filed share sale documents with the markets regulator.

"However, they may face challenges given the volatile equity markets, lack of clarity on long term policies, industry outlook, and overvaluation issues," E&Y warned.

To be sure, the strength in India's IPO market has waned between April and June. The second quarter saw 36 IPOs raising as much as $1.7 billion, 24% lower than the previous three months, the report said.

An escalating trade war between the U.S. and China, as well as with Europe, has been rattling global markets over the past few months. India's benchmark index has fallen 3.5% since touching a record high in January. Foreign investors pulled out $3.1 billion between April and June, according to data from National Securities Depository Ltd.

Global markets have been volatile since mid-March when U.S. President Donald Trump slapped tariffs on steel and aluminum imports from countries in European Union, China and Mexico. A 50% jump in crude oil prices over the past year added to the market volatility.

--Dhanya Ann Thoppil

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