India could see a record equity supply of Rs 2-3 TRN in FY22: Jafferies

Indian equity markets that are trading near all-time high levels could see a record Rs 2 – 3 trillion ($30 – 40 billion) equity supply in fiscal 2021-22 (FY22) with 40 per cent of this being raised via initial public offers (IPOs), though the actual quantum of the corporate equity paper supply would depend on institutional flows and may bring in new investors, suggests a note from Jefferies.

“Maturing of India’s internet space, government’s disinvestment program and traditionally large financial issuers will likely dominate but at around 1 per cent of market-cap, the supply is within limits. Our analysis suggests that net equity supply has easily exceeded 1 per cent in strong bull markets in the past and a similar number now can imply net / gross equity issuance of $30-40 billion can be absorbed,” wrote Mahesh Nandurka, managing director at Jefferies in a coauthored report with Abhinav Sinha. The net (of buy-backs, adjusted for promoter contribution to rights) equity supply in FY21, according to Jefferies, was at an estimated $24 billion – a three-year high.

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