Block deals gained momentum in June on the back of buoyant equity markets as $3.9 billion worth of shares changed hands — the highest in three years, stated a report by Business Standards. This is the highest after May 2020 when $4.7 billion worth of deals were struck, it added.
The report informed that some of the companies that were involved in block trades are Coal India, Shriram Finance, HDFC Life, Policy Bazaar and Kalyan Jewellers, among others. One must note that a block deal is when 500,000 shares or at least ₹5 crore worth of shares change hands in a single transaction. These shares are typically bought by institutional buyers.
“As confidence comes back in the market, you do see these (block deal) activities pick up first before longer lead items like IPOs (initial public offerings) come to the market. It generally marks the beginning of a positive cycle from a deal-making perspective,” Debasish Purohit, managing director (MD) and co-head of India investment banking, Bank of America told Business Standard.
Bank of America has more than 30 percent market share, having raised $1.1 billion through four blocks — Policy Bazaar, HDFC AMC, HDFC Life and Timken, noted the report.
Meanwhile, bankers told BS that the activity in block deals is seen as a precursor to the growth in the IPO market.
“It (block deal) helps because it gives confidence to longer lead products like IPOs to test the market. Companies and sponsors are getting prepared for IPOs. Since these processes take long, I think we will see IPOs coming back in greater volumes towards the end of 2023 and early 2024,” Purohit said.
“India has seen a rising trend of private equity investments over the last several years. As the investment cycle matures, it is normal for PEs to monetise their stakes, with IPOs and block trades being the most popular routes. Public market exits were challenged for the last few quarters, but with capital markets looking up, it is but natural to expect private equities to try and use the current markets to monetise a part of their holdings,” Purohit said.