IPO boom is not a one-off event, says Axis Capital’s Salil Pitale

2021 has been a bumper year for IPOs. Do you expect that to continue?
The past year has seen record IPO activity. Axis Capital has been at the forefront in ECM action in India. We managed 33 IPOs last year which is over 50% of all the IPOs that hit the markets in calendar 2021. However, I don’t see this as a one-off event. There are a number of trends that suggest that India’s capital market activity will remain healthy. We have seen retail investors play an important role in the public issues that we saw last year. The retail components of several public issues were subscribed on the first day of the issue. The growth in the number of demat accounts and a strong emerging equity culture explains their increased role. Mutual funds have had a sustained set of inflows in their SIP schemes.

Moreover, foreign investors continue to find India an attractive investment destination, as numerous businesses and supply chains look at alternatives apart from China. India has always had a strong entrepreneurial culture, which is very evident in this new digitally-enabled India, and the aspirations and capital needs of our entrepreneurs plus a strong consuming class is further attracting global capital. Interest rate increases and inflation will surely create some blips, but the overall exuberance is here to stay.

What are the some of the valuable lessons you are picking up from the way things have panned out?
There are some very interesting trends. It is particularly striking that private equity firms that struggled in India in late 2000s and early 2010s to exit their investments are now finding many opportunities. The scale of private equity investment in India has reached a new high, with over $60 billion of transactions recorded last year. Many of them were secondary deals which means that existing investors who financed the initial risk in a venture found takers for their investments with a new set of investors coming in to replace them. This was especially so in the technology space. This is a positive trend.

Moreover, we saw a number of companies backed by private equity firms tapping the IPO market. Many private equity investors found an exit or were able to pare their stakes and monetize investments through this route. Importantly, public market investors have been receptive to such offerings. And with successful exits, Private Equity investors are able to access pools of capital to further invest in Indian enterprises, which would help create the next round of successful enterprises.

What other forms of capital raising activity are you seeing besides IPOs?
One of the other investment products that are gaining ground are real estate investment trusts (REIT) and infrastructure investment trusts (InvITs). There is going to be a greater role for such products. They offer investors a good return, well above bank deposit / debt returns, and with regular cash flow streams. In case of REITs, there is an in-built capital appreciation that investors can play for. REITs also allow investors to effectively invest in real estate with small sums of money and without the hassle of managing an illiquid real estate investment. Even if you take net of tax returns, these new products offer good investment options beyond traditional debt instruments and without the higher risk profile of equity.

What are the areas that Axis Capital is concentrating on?
We have been a consistent top 3 player in terms of rankings for IPO arrangers for almost 2 decades and were no. 1 last financial year. This is thanks to a well-built ECM franchise with strengths across corporate finance, institutional, retail and HNI distribution. We are continuously building our strengths in sectoral coverage. We are growing our focus on M&A and private equity transactions. We have the capability to provide intelligent promoter financing support as well as for M&A transactions. We clearly want to emerge as a very strong full-service Investment Bank.

We have a strong relationship with our parent Axis Bank and bring a OneAxis approach to all our client relationships, so as to offer a comprehensive banking and investment banking solution where required. We are able to generate opportunities for Axis Bank through relationships with our customers who may require banking products and services, and similarly are able to tap into the clients of the Bank who may require investment banking services. We continue to remain very entrepreneurial in our approach because of our Enam legacy. We are ramping up our institutional equities practice and have been able to attract best talent in equity sales, trading and research, and are focusing on creating a very powerful equities franchise.