IPOs in 2023: After dull 2022, Kotak expects IPO issuances to rise 30% to USD 10 bn this year

After a sharp decline in initial public offer activities in 2022, Kotak Investment Banking on Thursday said it expects a 30 per cent jump in IPO issuances in 2023.

Its head of equity capital markets, V Jayasankar told reporters that there is a strong pipeline of over USD 9 billion, which has been approved by capital markets regulator Sebi, and another USD 6 billion filed with the capital markets watchdog, of which USD 10 billion should fructify.

In 2021, Indian companies raised USD 16.5 billion through IPOs, which fell to USD 7.6 billion in 2022 amid massive volatilities in the market.

"Last year, the markets were impacted by the severe bearish sentiment that came from the US and the rest of the world," Jayasankar said, adding that while the volatilities will continue this year, the same will be more "manageable", making the IPO window available through the year.

A lot of the issuances will be sized under Rs 1,000 crore and in the Rs 1,000-2,000 crore bracket, he said, adding that there are a couple of large issuances as well which will get investor focus to the ones sized between Rs 2,000-Rs 5,000 crore.

On valuations, he said a lot of IPOs in 2022 have given reasonably good returns to investors and this has been a buyer's market.

A lot of activity in 2022 was dominated by secondary market issuances, and the same is likely to sustain in 2023 as well, the company said. 

Kotak Investment Banking, one of the leading I-banks in the country, said the overall equity fundraising in the country, which will also include deployments by private equity companies, will touch

USD 25 billion in 2023, taking the number closer to the pre-COVID figure.

The company's managing director and chief S Ramesh said India has become a formidable market for i-bankers and is in the middle of a long bull run.

He expects the overall fee size being made by the rainmakers to be at USD 1 billion on the back of nearly USD 1 trillion in investments by foreign portfolio investors and financial sponsors like private equity funds.

On the IPO front, the company expects ESG (environment, social and governance) and defence sector companies to be in focus, while the infrastructure sector will also get investments across various routes.

On the valuations front, the company conceded that the price points at which companies are trading are high but the same may not change given the size of the opportunity that is available.

The issue in India is finding investible large deals, its senior executive director Pankaj Kalra said.