➤ I-Sec expects a significant increase in the number of IPOs in India in 2021.

➤ I-Sec sees IPO interest in tech and biotech sectors in India, though not much interest in SPACs.

➤ COVID-19 resurgence may hurt economy, but I-Sec expects fewer disruptions than in 2020.

Ajay Saraf, ICICI Securities' head of investment banking and institutional equities

India will likely see a significant increase in the number of companies going public in 2021 despite concerns about the potential volatility from the resurgence of COVID-19 cases in the country, Ajay Saraf, investment banking and institutional equities head at ICICI Securities Ltd., told S&P Global Market Intelligence in a recent interview. I-Sec is the investment banking and brokerage arm of ICICI Bank Ltd., India's second-biggest private sector lender by assets.

The surge in global equity markets in the second half of 2020 and ample liquidity thanks to easy monetary policy are themes that are spilling over into 2021. Saraf believes this year may be a repeat of 2020, when almost $26 billion was raised in the primary markets in India and capital market volume jumped 65%. Sectors that were seen as beneficiaries of the pandemic are expected to continue doing well, shrugging off any disruptions that may hit the consumer retail segment during the April-June quarter.

The rising number of COVID-19 cases, however, is a concern for the wider economy. Inflation inching up and rising bond yields worldwide are also on investors' mind, Saraf said. May will likely define how Indian companies deal with the short-term repercussions of the pandemic. He warned that if disruptions persist beyond June, the fundraising plans of companies in sectors other than healthcare, pharmaceuticals and some open, non-lending financial services may be affected.

The following conversation has been edited for length and clarity.

S&P Global Market Intelligence: How do you think India's capital market will look this year in terms of companies going public and investor activity?

Ajay Saraf: For 2021, I think the capital market will be more volatile than it was in 2020, particularly post-June. There will be months with windows of opportunity, but I don't think it will be a one-way market like what happened in June-December last year.

We saw almost $26 billion of funds raised in the primary market in 2020 in the Indian market. Also, capital market volume was 65% higher than what it was in 2019.

Many companies have given the intention to raise money this year. We are seeing documents filed with the regulator and they have gone up quite a bit. We also see many companies preparing and taking the plunge to initial public offerings.

Do you think more companies may launch IPOs in 2021 than in 2020?

There are two parts to that question. The first is the number of companies going public and the second is the volume as a tangible value for the transactions. I am very sure that the number of companies going public will be larger than what we saw in 2020, with more broad-based activities in the capital market. In terms of the total value, we have to see how much money each company decides to raise. It may be at a similar level to last year and I don't see it being a significant increase in terms of total value but in the number of companies, there would be a significant difference.

What may be the key concerns for investors over the next 12 months?

The resurgence of COVID-19 cases in India, the rising bond yields across the globe, especially the U.S. 10-year bond yields, and inflation inching up can cause some concerns to investors. They are expected to monitor these triggers. But since people kind of already know what to do during the pandemic, I expect to see business as usual this year.

How do you think fundraisings will fare considering the resurgence of the COVID-19 cases in India?

Beneficiaries of the pandemic, which include more of the tech digital players, as well as specialty chemicals, some commodity companies, healthcare and pharmaceuticals, will start out well and continue to do well. However, companies in the consumer retail segment are expected to experience a short disruption maybe in the April-June quarter.

If that's how it plays out, I don't see too much impact even on consumer brick-and-mortar companies. But if the disruptions continue beyond June, then you might see some repercussions on fundraising plans for some sectors, which may be affected more than, say, health, pharma and some open, non-lending financial services companies.

Is India also seeing IPOs of pre-revenue tech companies that have been quite hot in East Asia, with China and Hong Kong even having special boards dedicated to such firms?

Last year, we saw some IPOs of startups. This year, we saw the first listed gaming company, Nazara Technologies Ltd. We saw a lot of interest from foreign and domestic investors, sovereign funds and family offices. These companies have delivered good returns to investors post-listing. We definitely see a big interest and a large area where issuances and listings will happen in the tech and biotech sectors.

Are companies in India looking at special purpose acquisition companies to go public?

Some companies are definitely looking at listing via SPACs. Having said that, not too many companies in India are of that size or are on the path to profitability. In the U.S., you see fewer companies exploring those routes. I don't see it becoming a trend or anything substantial in India.