Equirus’ Bhavesh Shah on FIIs’ “moody capital” and India’s IPO pipeline | Mint

Mumbai: India’s equity market is no longer dominated by foreign institutional investors as domestic funds have increasingly become active in the space, said Bhavesh Shah, managing director and head of investment banking at Equirus Capital.

Terming FII funds flowing into the country as “moody capital” and cyclical, Shah said the 7% gap between FIIs and domestic institutional investors in India’s equity market had narrowed.

“Now it is neck and neck. So FIIs and DIIs own the same percentage in the companies in India,” Shah said at the Mint India Investment Summit in Mumbai on Friday.

Retail investors, who have been increasingly investing in mutual funds, have also brought about a shift deepening India’s equity market, Shah said. “Today, the total assets under management of the overall mutual fund industry is ₹64 lakh crore ( ₹64 trillion), and 35% of that is equity money,” Shah said.

IPOs: A ₹2 trillion pipeline

On India’s IPO pipeline, Shah said it was looking fairly strong this year, adding that the Securities and Exchange Bureau of India has cleared 49 IPOs of companies that are cumulatively looking to raise ₹84,000 crore.

Sebi is also reviewing 67 draft red herring prospectuses of companies, he said. “We have already raised ₹15,000 crore till March. So we are on our way to maybe raise, basis this pipeline, ₹2 lakh crore ( ₹2 trillion),” he said.

Shah also pointed to the gradual revival in the number of companies going public in India.

“We saw a big amount of activity in 2004 to 2007 before the global financial crisis. There was a major lull in the decade thereafter. But in the last five years, we have seen activity come back into the IPO market,” Shah said, adding that the money raised via IPOs had also significantly increased.

“From 2001 to 2010, the first decade of this century, we raised about ₹2 lakh crore ( ₹2 trillion), and in the second decade (from 2010 to 2020), again the same. But in this decade, in only five years, we have raised double of what each of these decades had done,” Shah said.

On IPO investors

The investment banker also pointed out that the recent IPOs had fetched investors good returns. “Subscribing to IPOs has led to a significant amount of wealth creation for investors. For all the IPOs that were there in 2021, investors till date have made a 65% return,” he said.

A highlight of recent IPOs has been offers for sale, Shah pointed out. “In today’s scenario, we are not only seeing secondary sales from investors or private equity investors, but even sometimes promoters selling their shares,” he said.

Shah’s explanation for this was that instead of investing in cash-hungry businesses, investors preferred to invest in cash-growing businesses. “They take a secondary from the promoter and then see the company grow on a regular basis.”