A total of 37 Indian corporates raised Rs 52,116 crore through the main board initial public offerings (IPOs) in financial year 2022-23. This was incidentally less than half of the all-time high of Rs. 1,11,547 crore mobilised by 53 IPOs a year ago in 2021-22.
The largest IPO, which was incidentally also the largest Indian IPO ever, was of Rs 20,557 crore of the Life Insurance Corporation (LIC) of India, followed by Delhivery (Rs. 5,235 crore) and Global Health (Rs. 2,206 crore). The average deal size was Rs 1,409 crore, according to a report by Prime Database.
The fund mobilisation of the public market for 2022-23 was as follows. The total IPO in 2022-23, including SME IPOs was Rs 54,344 crore. The total equity inflows was Rs 76,076 crore. The total public bonds, including infrastructure investment trusts and real estate investment trusts, and excluding public debts was Rs 8,944 crore.
The corresponding figures for 2021-22 were Rs. 1,12,512 crore, Rs. 1,73,728 crore, and Rs. 11,710 crore. Overall, public equity fundraising dropped by 56 per cent (Rs. 76,076 crore from Rs. 1,73,728 crore in the previous year, the report said.
Domestic mutual funds also played a more dominant role than foreign portfolio investments (FPIs). Qualified institutional buyers (including anchors investors) as a whole subscribed to 59 per cent of the total public issue amount.
Overall, 68 companies filed their offer document with the Securities and Exchange Board of India (Sebi) for approval (in comparison to 144 in 2021-22) including the first ‘pre-filing’ case of Tata Play in December 2022. Elsewhere, 37 companies looking to raise nearly Rs. 52,060 crore let their approval lapse in 2022-23, while 12 companies looking to raise Rs. 10,386 crore withdrew their offer document and Sebi returned the offer document of a further nine companies looking to raise Rs. 20,330 crore, the report said.
Pranav Haldea, managing director, Prime Database Group, said in a statement that as many as 25 out of the 37 IPOs came in just three months – May, November and December.
“This shows the volatile conditions prevalent through most of the year which are not conducive for IPO activity. In fact, the fourth quarter of 2022-23 has seen the lowest amount being raised in the last nine years,” Haldea said.
According to the report, only two out of the 37 IPOs (Delhivery and Tracxn) were from a new age technology company (NATC) (in comparison to 5 NATC IPOs raising in Rs. 41,733 crore in 2021-22), thus pointing towards the slowdown in IPOs from this sector.
Retail Response Moderate
The overall response from the public was moderate. According to the report, the average number of applications from retail dropped to just 564,000, in comparison to 1.33 million in 2021-22 and 1.27 million in 2020-21.
“The amount of shares applied for by retail by value (Rs. 41,671 crore) was 20 per cent lower than the total IPO mobilisation (in comparison to being 17 per cent higher in 2021-22) showing the lower level of enthusiasm from retail during the period. The total allocation to retail, however, was Rs. 14,308 crore which was 28 per cent of the total IPO mobilisation (up from 20 per cent in 2021-22),” the report said.
“The highest number of applications from retail were received by LIC (3.27 million) followed by Harsha Engineers (2.38 million) and Campus Activewear (1.72 million),” Prime Database said in the statement.
“Of the 36 IPOs for which data is available presently, 11 received a mega response of more than 10 times (of which two IPOs more than 50 times) while seven IPOs were oversubscribed by more than three times. The balance 18 IPOs were oversubscribed by 1-3 times. The new HNI segment (Rs. 2 lakh – Rs. 10 lakh) saw an encouraging response with 11 IPOs receiving a response of more than 10 times from this segment,” the report added.
Haldea said that the IPO response was further muted by moderate listing performance.
Average listing gain (based on closing price on listing date) fell to 9.74 per cent, in comparison to 32.59 per cent in 2021-22 and 35.68 per cent in 2020-21.
“Of the 36 IPOs which have got listed thus far, 16 gave a return of over 10 per cent. DCX Systems gave a stupendous return of 49 per cent followed Harsha Engineers (47 per cent) and Electronics Mart (43 per cent). At present, 21 of the 36 IPOs are trading above the issue price (closing price of March 24, 2023). Only 14 out of the 37 IPOs that hit the market had a prior PE/VC investor who sold shares in the IPO,” the statement said.
Outlook For 2023-24
According to the report, the pipeline remains strong for the coming year.
At present, 54 companies proposing to raise Rs. 76,189 crore are holding Sebi approval, while another 19 companies looking to raise about Rs. 32,940 crore are awaiting Sebi approval. Of the 73 companies, four are NATCs which are looking to raise roughly Rs. 8,100 crore).
According to Haldea, given the weakness still prevailing in the secondary market, because of a combination of domestic and foreign factors, IPO activity is likely to remain muted for the first couple of quarters.
“We may see some smaller-sized IPOs. However, it will be a while before we see larger sized deals, especially in light of lack of sustained interest from FPIs,” said Haldea.
