Buckle up because India’s IPO bash is in full swing! If you have kept a modest eye on the market, you will realise it’s raining IPOs out there. Maybe, even you might have leapt into the IPO arena, crossing your fingers for a golden ticket. Yet, despite the abundance, the non-allotment saga persists, playing hard to get, much like the last slice of pizza. But hey, enough with the sob stories! Let’s wade into the captivating journey of the vibrant Indian IPO trend. It’s a financial carnival where every IPO is putting on its dazzling show, with oversubscriptions stealing the spotlight.
India’s Decade-High IPO Triumph
In 2023, the number of IPOs hit a decade-high, marking a record year. In the ever-changing landscape of initial public offerings, the tale of 2023 unfolds in two distinct chapters. The first half witnessed a sluggish and dry spell in the primary markets, which was followed by a substantial surge in newly listed stocks going public during the latter part of the year. While the fundraising scale may not have matched the attractiveness of 2021, the sheer volume of IPOs and the returns they generated more than compensated for it.
The Indian equity market has witnessed a notable surge in initial public offering activity in recent years, demonstrating the resilience of the Indian economy and standing strong amid uncertainty in the global economy. India has surpassed all other countries in the world in terms of the number of IPOs in 2023, becoming an exception as opposed to more established economies that are experiencing slow growth.
“India’s relevance to the world is ever-increasing, as one among the few economies continuing to outperform against a global slowdown,” Nomura’s Natarajan stated.
2023 IPO Metrics
The year 2023 witnessed 60 mainboard initial public offerings. Just 9 of these 60 initial public offerings were released in the first half of the year, with the remaining 51 IPOs being released in the second half. Regarding IPOs, the fourth quarter of 2023 had the highest concentration, with 28, followed by the third quarter, with 23 IPOs.
Remarkably, the majority of IPOs have been primary tranche issuances, indicating that firms are seeking to raise additional funds to expand their operations or repay debt. This indicates the promoters’ faith in the potential of their businesses and the Indian market’s capacity to support their growth objectives.
LIC, the most prominent life insurer in India, created history previously when it raised funds and became the largest IPO ever, receiving 73.38 lakh applications. When Tata Technologies, a Tata Group firm, issued its IPO recently and received an incredible 73.58 lakh applications, it surpassed this record and listed with 140% gains.
Five main board IPOs were launched in just one week, a situation that had only happened in March 2021. These IPOs blocked 2.2 trillion that is, about 6.5% of the country’s currency circulation. With an 88% increase on the listing day, IREDA Ltd. had the second-highest opening of any PSU IPO after IRCTC.
Performance of SME IPOs
2023 witnessed a surge in SME IPOs, with 179 listed and numerous significantly oversubscribed. From Rs 13 crore in 2021 to Rs 18 crore in 2022 and Rs 25 crore in 2023, the average ticket size for SME IPOs is rising, suggesting that promoters are looking for more funding to support their expansion goals and that investors are responding favourably to these opportunities. Among the many successful SME IPOs are RBM Infracon and Gayatri Rubbers & Chemicals. However, the analysts are divided on the sustainability of the SME IPO boom in 2024.
2024 Elections Drive IPOs
In anticipation of possible market turbulence during the voting period, promoters are rushing their stock market listings with the general elections scheduled for May 2024. The listing plans are becoming more urgent due to the impending uncertainties surrounding the continuation of business and economic policies, particularly in light of the potential for a new political party to take power.
2024 appears to have a bright future for initial public offerings, with an abundance of businesses from both established and emerging industries. It is expected that the optimistic outlook for issuers with solid fundamentals that was evident in the most recent listing round in 2023 would continue into 2024.
Although a temporary slowdown is anticipated in the months preceding the general elections, investors are expected to revive interest following the results, which might lead to a surge in IPO activity. This is expected to maintain momentum far into 2024, especially given the firm economic activity and the favourable perceptions that both domestic and foreign investors have of India.
Changing IPO Landscape: Tech’s Rise
The categories of businesses making their way into the public sphere are changing, and this shift is being driven by a combination of established firms, hopeful startups, and IT behemoths. There has been a notable change in the structure of companies doing initial public offerings in recent times. Tech-focused IPOs have taken centre stage, as evidenced by an influx of prominent companies in the market, including Zomato, PolicyBazaar, Paytm, Nykaa, Nazara, Delhivery, Honasa, and others. This pattern highlights the growing acceptance of new-age industries by Indian markets, indicating investors’ openness to innovative ideas.
The players believe there will always be sufficient demand for tech companies with solid business plans, an obvious path to profitability, and good corporate governance frameworks in the Indian public markets. We anticipate that more tech businesses will approach public markets in the upcoming quarters, offering public investors a compelling chance to participate in the India tech story.
Conclusion
In summary, the trajectory of the Indian IPO market suggests continued growth, driven by a combination of factors, including a robust economy, increased investor confidence, a supportive regulatory environment, and the rise of tech-related businesses. Even though the market penetration is barely 3% of the Indian population, the anticipated increase in disposable incomes signals a substantial inflow of capital into the equities markets. The IPO market in India is expected to play a more significant role in stimulating national growth and creating wealth for investors as the country’s financial landscape develops and its economic reach expands.
Written by – Saba Godiwala
Edited by – Mrunmayee Patwardhan