While corporate India has been feeling the heat due to lockdown announced to curb the spread of COVID-19, the equity market has been on a roller-coaster ride.
The primary market has not been spared either. In fact, the first six months of 2020 has been one of the worst periods for the IPO market since the first half of 2012.
A total of 17 companies were listed on the bourses during the first half of this calendar year, and only one issue - SBI Cards and Payment Services - was from the main board segment. The rest 16 were small and medium enterprises (SMEs).
In comparison, 35 companies made a debut on exchanges, of which 7 entities were on the main board, in the same period last year.
Many companies were scheduled to launch their IPOs after SBI Card, but COVID-19 punctured the sentiment on the Street. Due to the impact of economic activities, global equity markets collapsed including India's Nifty and Sensex, which lost 40 percent each in March from their record highs seen in January 2020.
"COVID-19 and limited fresh liquidity is the culprit for the dryness in the primary market after blockbuster subscription seen in SBI Card and underperformance post listing the space dried out like a desert. In a year in which the COVID-19 pandemic has restricted economic activity and led to high market volatility, the uncertainty and fear sparked off in financial markets," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.
"IPO market has taken a beating as book runners as well as promoters step back and hold considering the low demand scenario. We also assume that weak secondary market sentiment and marketwide concerns mess weighed in on primary market investor sentiment," he said.
After February-March crash, the market as well as all other segments bounced back as the government started to unlock the economy and restricted lockdown to containment zones only, but the Main Board IPO market segment has not seen revival yet.
Experts feel the trend may revive in the second half of CY20 only if the market and economic activity stabilises, and companies which can successfully fight pandemic with uniqueness, niche and leader among sectors could be seen acceptance in the primary segment from investors.
"Well-prepared companies, in the right sectors and business models that can successfully adjust during the pandemic, will find the right window of opportunity amid turbulent capital market for the rest of 2020," Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor told Moneycontrol.
"With volatility levels trending down and rebounds in main indexes, markets are adaptable, resilient and supportive for IPO activity to pick up in the second half of 2020, especially in technology and pharmaceuticals and healthcare sectors," he said.
Prashanth Tapse feels it will be difficult for primary offerings to come in today's scenario and find acceptance from the market participants, even if they are quality names, but if there is some stability in the market and economic activity, then primary market can see 1 or 2 company attempting to dare in FY21.
"UTI AMC and LIC would be potential companies that may come up with IPO offer in 2HCY20," he said.
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