Main-Board IPOs Resilient Amid Global Headwinds, Garner Rs 52,000 Crore in 2023

IPO Collection Soars 36% in 2023, Excluding LIC’s Record-Breaking Rs 20,557 Crore Maiden Public Issue in 2022.

The IPO Market in 2023: A Robust Environment Despite a Tepid Start Amid Global Headwinds.

Capital Generation and Global Volatility: The capital raised through mainboard IPOs in 2023 amounted to just over Rs 52,000 crore.

However, this figure reflects a slight dip, indicating that there might have been challenges or reduced investor appetite during the year.

Global Volatility Factors: The dip in capital is attributed to global volatility, specifically driven by factors such as rising interest rates and geopolitical risks.

Global economic conditions and uncertainties can influence investor sentiment and impact fundraising activities in the capital markets.

Increased Number of Issues: Despite the dip in capital, there is a notable increase in the number of issues.

This suggests that there was still significant activity in the IPO space, with more companies choosing to go public during the year.

Outlook for 2024: Despite the challenges faced in 2023, experts maintain a strong bullish outlook on the IPO market for 2024.

This optimism could be based on expectations of improved economic conditions, increased investor confidence, or a positive shift in global factors affecting market dynamics.

Excluding LIC’s substantial maiden public issue of Rs 20,557 crore in 2022, the overall collection from initial public offerings (IPOs) has witnessed a notable increase of 36% in the current year.

This highlights a significant growth trend in IPO activity, showcasing the market’s strength and attractiveness for new issuances.

This year, mid and small-cap companies were favored, benefiting from the significant market tailwind.

In 2023, the IPO market has been exceptionally strong, overcoming a tepid start attributed to global headwinds.

Mahavir Lunawat, Managing Director of Pantomath Capital Advisors, attributes the strong interest in IPOs to a focus on profitability and reasonable pricing, relative to higher valuations in listed peers. He also highlights the robust and efficient regulatory framework as a key pillar of the Indian market ecosystem.

V Prashant Rao, Director & Head – ECM, Investment Banking, Anand Rathi Advisors, anticipates that the momentum of 2023 will extend into 2024, potentially creating a golden period for the Indian primary markets.

“We are optimistic about the 2024 IPO market, driven by strong domestic and foreign investments due to India’s superior growth prospects. Inflows are expected to surge further post the resolution of election-related uncertainties,” stated Neha Agarwal, MD & Head, Equity Capital Markets, JM Financial.

Approximately 24 companies, cleared by SEBI but yet to launch their IPOs, aim to raise over Rs 26,000 crore.

In addition, 32 companies have submitted draft papers to SEBI and are awaiting clearances to raise over Rs 35,000 crore, as per data from Prime Database.

According to industry data, a total of 58 maiden public issues have been launched this year, aiming to raise Rs 52,637 crore, which includes the Rs 3,200-crore IPO of Nexus Select Trust REIT.

In 2023, the total fund mobilization was lower than the previous year, with 40 companies raising Rs 59,302 crore in contrast to the significant impact of the Rs 20,557-crore LIC issue, which constituted 35% of the total amount raised in 2022.

Before that, in 2021, a total of 63 companies had raised Rs 1.2 lakh crore through initial share sales, marking the best IPO year in two decades. The significant fundraising was attributed to excessive liquidity and heightened retail investor participation, leading to sustained enthusiasm in the primary market.

Over the past three years, more than 150 mainboard IPOs have been listed.

“2023 was a successful year for Indian IPO markets despite global volatility from rising interest rates and geopolitical risks,” stated JM Financial’s Agarwal.

Out of the 58 total issues, 38 were launched between September and December.

In 2023, large-sized IPOs were notably absent, with an average ticket size of Rs 865 crore. This trend was also observed in the previous year. Apart from LIC and Delhivery, the majority of IPOs fell into the sub-Rs 1,500 crore category.

In 2023, the largest IPO was Mankind Pharma (Rs 4,326 crore), followed by Tata Technologies (Rs 3,042 crore), JSW Infrastructure (Rs 2,800 crore), RK Label (Rs 1,964 crore), and Cello World (Rs 1,900 crore). The smallest IPO during this period was Plaza Wires, which raised Rs 67 crore.

“With considerable tailwinds in the markets, mid and small-cap companies are favored and expected to continue dominating,” stated Anand Rathi Advisors’ Rao.

Going public yields additional funds for expansion, working capital, and debt repayment. It enhances visibility, attracting business opportunities, and serves as an exit strategy for long-time investors.

Indeed, the IPO subscription ratio has been notably high this year. Notably, issues like Motisons Jewellers, Plaza Wires, Utkarsh Small Finance Bank, and ideaForge Technology witnessed subscriptions of more than 100 times.

The significant interest in IPO launches resulted in positive listing gains. Out of the companies listed this year, 47 are trading above their issue price, while only four are trading below it. Several firms have provided positive gains ranging from 0.25 percent to 228 percent.

The industrial, consumer discretionary, and healthcare sectors remained key drivers of the IPO market, collectively accounting for over 50% in terms of both the number of issues and funds raised. Technology and finance sectors also made substantial contributions.

In addition to main-board IPOs, there was a surge in public offers on the SME segment. This year, a total of 175 Small and Medium Enterprises (SMEs) raised a record Rs 4,545 crore through initial share sales, contrasting with 109 firms that raised Rs 1,875 crore in 2022 and Rs 746 crore in 2021.

Remarkably, the subscription rates for a dozen companies exceeded 300 times, with approximately 51 companies experiencing rates of more than 100 times. Additionally, the SME IPO index delivered an impressive 95% return for investors, as per FYERS Research’s report.