The recent downturn in the stock market is prompting companies planning to go public to rethink their strategies. According to Yatin Singh, the CEO of investment banking at Emkay Global Research, firms that have submitted their draft red herring prospectus (DRHP) to the Securities and Exchange Board of India (SEBI) may need to adjust their initial fundraising expectations.
Impact of Market Correction on IPO Plans
Singh highlighted that companies can only modify their fundraising goals by a maximum of 20% for initial public offerings (IPOs) and 50% for offer-for-sale options. However, sectors that have recently experienced significant declines, such as defense, power, capital goods, and railways, could present challenges for shareholders looking to sell.
- Market correction could lead to:
- Strategic re-evaluations of IPO plans.
- Increased uncertainty among companies regarding their projected fundraising amounts.
- Singh anticipates a rise in confidential filings as businesses grapple with their financial forecasts.
IPO and QIP Trends in 2024
In 2024, a total of 92 IPOs were recorded, raising over ₹1,62,261 crore, alongside 91 qualified institutional placements (QIPs) that generated ₹1,36,424 crore. Looking at early 2025, only 10 IPOs were launched in January-February, compared to 15 during the same period last year. Similarly, the number of QIPs dropped to 7 from 18 in the previous year.
Government Divestment Plans as a Catalyst
Despite the slowdown in IPO activity, the government’s divestment initiatives are expected to stimulate fundraising efforts. The Department of Investment and Public Asset Management (DIPAM) has set an ambitious divestment target of ₹47,000 crore for FY26, presenting a significant opportunity for investment banks in the upcoming fiscal year and beyond.
- Key takeaways:
- Public sector divestments are becoming crucial for investment banks in India.
- The government’s targets may offset the impacts of market volatility.
In conclusion, while the market correction prompts IPO-bound companies to reconsider their fundraising strategies, government initiatives could provide a necessary boost to the financial landscape, making it an intriguing time for investors and stakeholders alike.
