 "Explained: India emerges as global leader in the number of IPOs in 2023")
India has topped the world in terms of the number of initial public offerings (IPO) this year as the country stands out as one bright spot compared to other larger economies experiencing lacklustre growth. The rush to raise funds this year is continuing even though the broader market has fallen in the wake of global uncertainty and the Israel-Hamas conflict.
For the full calendar year to date, there have been a total of nearly 170 public offers by Indian firms. “India has emerged as the global leader in the number of IPOs year-to-date in 2023," EY said in a report.
According to an EY report, 21 IPOs were launched in India's main market in the third quarter of 2023, a stark contrast to the four IPOs in the year-ago period. The funds garnered in Q3 2023 reached US$ 1,770 million, marking a 376% growth from the $ 372 million of Q3 2022.
For the full calendar year to date, there have been a total of nearly 170 public offers by Indian firms. “India has emerged as the global leader in the number of IPOs year-to-date in 2023," EY said in a report.
According to an EY report, 21 IPOs were launched in India's main market in the third quarter of 2023, a stark contrast to the four IPOs in the year-ago period. The funds garnered in Q3 2023 reached US$ 1,770 million, marking a 376% growth from the $ 372 million of Q3 2022.
The three largest IPOs in Q3 in terms of proceeds were RR Kable Ltd, Concord Biotech Ltd, and SAMHI Hotels Ltd.
Key sectors contributing to this IPO surge included Diversified Industrial Products, Consumer Products and Retail, and Technology.
More than twenty-five companies have filed their Draft Red Herring Prospectuses (DRHPs) in Q3 2023, demonstrating a strong intent to raise funds in the upcoming quarters. The markets continue to reward companies with robust, scalable, and well-governed business models.
Market optimism is attributed to several factors, including the US recession, the Federal Reserve's pause in interest rate hikes, and inflation. Companies are striving to file for IPOs before the 2024 Indian elections, with the demand for IPOs surging this year compared to 2022.
"The IPO landscape is witnessing a surge in activity driven by both an urge to tap the capital markets pre-or-post Indian general elections and strong economic activity, positive domestic and foreign investor sentiment towards India. This momentum is expected to continue well into H2 2024," said Adarsh Ranka, Partner and Financial Accounting Advisory Services Leader, member firm of EY Global.
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The Small and Medium Enterprises (SME) segment also recorded significant success by raising US$ 165.76 million via 48 IPOs in Q3 2023.
Till June end, the number of companies making debut at the stock exchanges in India jumped to 80 as compared to 60 recorded in the same period last year, a year-on-year growth of 33 per cent.
The largest IPO in the first half of 2023-24 was from Mankind Pharma (Rs 4,326 crore). This was followed by JSW Infrastructure (Rs 2,800 crore) and RR Kabel (Rs 1,964 crore). At the other end, the smallest IPO was from Plaza Wires raising just Rs 67 crore. The average deal size was Rs 848 crore.
"While we have seen companies from multiple sectors tapping the IPO market in the last six months, one key sector which was missing was BFSI with just Rs 1,525 crore (or 6 per cent) being raised by companies from this sector (in comparison to 61 per cent in the same period last year)," said Pranav Haldea, Managing Director, PRIME Database Group.
Just 1 out of the 31 IPOs (Yatra) was from a new-age technology company (NATC) pointing towards a continuing slowdown in IPOs from this sector.
Average listing gain (based on closing price on listing date) increased to 29.44 per cent, in comparison to 11.56 per cent in the first half of 2022-23. Of the 28 IPOs which have got listed thus far, 20 gave a return of over 10 per cent.
Even though globally, the IPO trend has been downward, the same has not been witnessed in India. Some of the IPOs expected over the next few weeks include those of Tata Technologies, ESAF Small Finance Bank, ASK Automotive, and Protean eGov Tech.
"India's economic growth and the size of its consumer market make it an attractive destination for IPOs, particularly for companies looking to raise capital. Specific sectors in India may be performing well, leading to a surge in IPO activity. For instance, technology and e-commerce companies have attracted significant investor interest. Positive investor sentiment in India, driven by factors such as company valuations, profitability, and growth prospects, can encourage companies to go public," said Mahavir Lunawat, Managing Director, Pantomath Capital Advisors.
Moreover, a bullish market sentiment often leads to higher demand for IPO shares.
In earlier days, mostly one sector used to dominate the mainboard IPOs. However, in the recent past, there has been an upswing in IPOs from diverse sectors consisting of Small Finance Banks, biotechnology, supply chain management, apparel, jewellery, infrastructure, and cable manufacturing.
" Remarkable volume of IPOs in India, covering a diverse range of sectors and industries, showcases the country's economic resilience and its attractiveness as an investment hub. The IPO pipeline is expected to be bustling with enormous promise for the market economics and commission the flurry of IPOs palatable to the investor community at large. Sectors like infrastructure and power, renewables, manufacturing, and agriculture / Agro- base appear prominent. Unconventional and sunrise sectors like consumer electronics, electric mobility, robotics, aerospace, and drones will certainly add a new promising flavour to the Indian investor palate," said Lunawat.
At least 24 companies tapped the market in September this quarter to raise Rs 17,500 crore. The pipeline too is robust, with around 30 companies getting SEBI approval for IPOs where they will collect Rs 40,740 crore and around 38 companies with IPO size of Rs 43,659 crore still awaiting approval from SEBI and have filed offer documents.