Share sales by listed companies in India should remain active over the upcoming months as equities’ outperformance and supporting economic trends help attract foreign investors, according to Goldman Sachs.
(Bloomberg) — Share sales by listed companies in India should remain active over the upcoming months as equities’ outperformance and supporting economic trends help attract foreign investors, according to Goldman Sachs.
Additional share sales priced in the South Asia country in June amounted $3.3 billion, the highest tally for a month since March 2021, Bloomberg-compiled data show. The sum for the first six months of the year jumped to $6.6 billion, an increase of 140% annually, making India one of the busiest spots in Asia for such sales.
Blocks are “a leading indicator for ECM volumes in the coming weeks and months,” said Phyllis Wang, head of equity capital markets syndicate for Asia ex-Japan at Goldman Sachs Group Inc. While sellers can “react quickly” to the environment they are seeing, recent activity has also been supported by the “quality of investors, who are aggressively looking for ways to invest into Indian equities,” she added.
Block sales, which are quicker and simpler to execute than follow-ons and traditional IPOs, come as India’s equity benchmarks continue to reach record high levels, buoyed by optimism for the country’s economic growth that’s being driven by strong domestic demand.
The NSE Nifty 50 Index is up 7.1% this year through Wednesday, versus a 5.1% gain for the MSCI Emerging Markets Index. Foreign inflows into Indian stocks in second quarter reached $13.6 billion, the highest for a quarter since the end of 2020.
The supportive economy has helped attract long-term foreign funds to the Indian market, helping narrow the discount gap from the blocks to the reference price of the shares. More than 80% of bunched trades in Mumbai during the second quarter have priced at a discount around 1%, according to Wang. Many institutional investors are now hiring dedicated Indian specialists and building the infrastructure to trade in the country, Wang added.
Some recent sizable block trades in Mumbai included holders exiting stakes completely, such as Abrdn Investment Management Ltd. raising $498 million from the sale of its remaining shares in HDFC Asset Management Co., and Piramal Enterprises Ltd. selling all of its holding in Shriram Finance Ltd. Both HDFC AM and Shriram Finance are up more than 10% since the stake sales.
While the last quarter of 2023 was marked by many blocks that followed the end of lock-up periods for big IPOs by technology, media and telecommunication companies, now “the offerings are much more diversified by sector and size,” Wang said. “Institutional investors have noticeably broadened their universe of investable Indian equities, though valuations remain a point of focus.”
–With assistance from Chiranjivi Chakraborty.
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