IPO fundraising down 26% but average listing gains are up 29% this year

Even though overall public equity fundraising has increased 69 per cent in the first half of 2023-2024, funding for initial public offerings ( IPOs) has dipped in the same period.

Thirty-one Indian corporates raised Rs 26,300 crore through main board IPOs in the first half of 2023-24, 26 per cent lower than the Rs 35,456 crore mobilized by 14 IPOs in the same period in 2022-23, according to primedatabase.com, India’s premier database on the primary capital market.

However, excluding the mega LIC IPO which took place last year, IPO mobilisation increased by a huge 76 per cent from last year.

 

Overall public equity fundraising increased to Rs 73,747 crore from Rs 43,694 crore in the first half of 2022-23.

Main Board IPOs: 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. 

As many as 21 out of the 31 IPOs came in just 2 months of August and September.

"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.

 Of the 28 IPOs for which data is available presently, 19 IPOs received a mega response of more than 10 times (of which 9 IPOs more than 50 times) while 4 IPOs were oversubscribed by more than 3 times. The balance 5 IPOs were oversubscribed between 1 to 3 times. The relatively new HNI segment (Rs 2-Rs 10 lakh) saw an encouraging response with 17 IPOs receiving a response of more than 10 times from this segment.

In comparison to the first half of 2022-23, the response of retail investors increased tremendously.  The highest number of applications from retail were received by Ideaforge (22.29 lakhs) followed by Aeroflex (21.62 lakhs) and SBFC Finance (20.19 lakhs).

The amount of shares applied for by retail by value (Rs 55,516 crore) was 118 per cent higher than the total IPO mobilisation (in comparison to being 33 per cent lower in 2022-23) showing a much higher level of enthusiasm from retail during the period. The total allocation to retail, however, was Rs 6,506 crore which was 26 per cent of the total IPO mobilisation (slightly down from 28 per cent in 2022-23).

According to Haldea, IPO response was further buoyed by strong listing performance. 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. 

Ideaforge gave a stupendous return of 93 per cent followed Utkarsh Small Finance Bank (92 per cent) and Netweb Technologies (82 per cent). 27 of the 28 IPOs are trading above the issue price (closing price of 3rd  October, 2023).

Only 12 out of the 31 IPOs that hit the market had a prior PE/VC investor who sold shares in the IPO. 

Offers for sale by such PE/VC investors at Rs 7,505 crore accounted for 29 per cent of the total IPO amount. Offers for sale by private promoters at Rs 5,063 crore accounted for another 19 per cent of the IPO amount. On the other hand, the amount of fresh capital raised in IPOs in the first half of 2023-24 was ₹12,979 crore or 49 per cent of the total amount, the highest (in terms of per cent share) in 7 years. 

Anchor investors collectively subscribed to 36 per cent of the total public issue amount. Domestic Mutual Funds played a slightly more dominant role than FPIs as anchor investors with their subscription amounting to 15 per cent of the issue amount with FPIs at 14 percent.

Qualified Institutional Buyers (including Anchors Investors) as a whole subscribed to 61 per cent of the total public issue amount. FPIs, on an overall basis, as anchors and QIB, subscribed to 26 per cent of the issue amount, more than Mutual Funds at 20 per cent.

The first half of 2023-24 saw 48 companies filing their offer document with SEBI for approval (in comparison to 45 in the first half of 2022-23). On the other hand, in the same period, 23 companies looking to raise nearly Rs 43,000 crore let their approval lapse, 2 companies looking to raise Rs 5,500 crore withdrew their offer document and SEBI returned the offer document of a further 1 company looking to raise Rs 500 crore.

Outlook for the second half of 2023-24

The pipeline continues to remain strong. 28 companies proposing to raise Rs 38,000 crore are presently holding SEBI approval while another 41 companies looking to raise about Rs 44,000 crore are awaiting SEBI approval (Out of these 69 companies, 3 are NATCs which are looking to raise roughly ₹12,000 crore). According to Haldea, notwithstanding the present volatility in the secondary market, the next 4-5 months are likely to see several IPOs being launched before a pause on account of the general elections.