The Iran-Israel-US military escalation has effectively frozen India’s IPO pipeline. At least three companies with approved IPOs are reportedly reconsidering their launch timelines, as market volatility makes pricing and subscription highly uncertain.
IPOs at Risk of Postponement
Hexaware Technologies (Was: April 7-9)
Carlyle Group’s Rs 9,950 crore OFS was set to be April’s marquee IPO. However, with Nifty down 12% from January highs and IT stocks under pressure from global recession fears, bankers are reportedly advising a 4-6 week delay. The risk: investors may demand a discount to the Rs 674-708 price band, which Carlyle is reluctant to accept.
Ather Energy
The electric scooter maker’s Rs 4,500 crore IPO was expected in April-May. Given that Ather is a loss-making company in a discretionary consumer segment, the current risk-off environment makes timing challenging. Hero MotoCorp (40% shareholder) is reportedly pushing for a delay until market sentiment improves.
Schloss Bangalore (Leela Hotels)
Hospitality stocks have been hit hard in the selloff (Nifty Realty -6.2% in one day). The luxury hotel operator may postpone its Rs 3,500 crore issue as the tourism sector faces headwinds from geopolitical uncertainty and higher air travel costs.
Why IPOs Don’t Work in Volatile Markets
- Pricing difficulty: Comparable stock prices are moving 3-5% daily, making it impossible to set a fair price band
- Subscription risk: Institutional investors are de-risking, not deploying new capital. QIB subscription could be weak
- Listing risk: In the current environment, even well-priced IPOs could list at a discount, damaging promoter and merchant banker reputation
- Retail sentiment: Retail investors who’ve seen 20-40% losses in small/mid-caps are unlikely to subscribe to new issues
Historical Pattern
During the Russia-Ukraine invasion (Feb-Mar 2022), the IPO market went completely silent for 8 weeks. During the COVID crash (Mar-May 2020), zero mainboard IPOs were launched for 3 months. In both cases, IPO activity resumed within 2-3 months of the market bottom.
Opportunity for Patient Investors
When IPO activity resumes, the first issuers will likely offer attractive valuations to ensure successful launches. Post-crisis IPOs have historically delivered 15-25% listing gains as pent-up demand meets reasonable pricing. Keep your IPO allocation dry powder ready for when the window reopens.