IPOs In 2023: Fourth Highest Issuances Ever But Funds Raised Drop — In Charts

India recorded the fourth-highest number of initial public offerings in 2023 as companies rushed to raise capital when the markets scaled new records despite geopolitical tensions and valuation concerns. By value, however, the mop-up fell over the previous year.

The calendar year 2023 saw a total of 58 mainboard IPOs and 176 issuances in the small and medium enterprises, according to data from Chittorgarh.com.

That's the most in a year after 63 in 2021. In 2007, a total of 108 companies raised funds through IPOs and about 66 companies opted for public listing in 2010.

According to a Nov. 1 EY report, India emerged as the global leader in the number of IPOs in the year. In December alone, more than 12 companies raised Rs 8,900 crore, making it the best month in two years.

The total amount raised, however, fell 17% over a year earlier to Rs 49,400 crore as the average ticket size was smaller.

The surge in the number of maiden offers has also triggered concerns if the pace is sustainable. Current IPO valuations appear to be highly stretched according to Dinshaw Irani, chief executive officer of Helios Capital India. "Even a small disappointment in the performance could lead to a significant correction in these stocks," he told NDTV Profit.

The BSE IPO, a gauge that tracks the performance of companies for two years after the offering, shows that recently listed companies have returned about 40% gains in 2023 against a loss of 29% in 2022.

The index has surged to a two-year high of 12,756.60, outperforming the BSE Sensex, which has risen 18.4%.

Rising market and bullish sentiment are the most suitable environments for IPOs, according to Mataprasad Pandey, vice president at Arete Capital Services Pvt.

"Market always derives the true value of a stock...Hence, IPOs that were fairly valued with strong fundamentals have done better than the expensive ones and with weaker balance sheet."

Another 29 companies are awaiting regulatory approval, involving a cumulative fundraising of about Rs 34,000 crore, said Mahavir Lunawat, managing director at Pantomath Capital Advisors Pvt.

IPOs serve as a bellwether for market sentiment and investor appetite, making them an essential aspect to monitor, Lunawat said. "The excitement surrounding these offerings could potentially stimulate market activity, paving the way for a vibrant trading week."

Smaller-sizes issues drew the biggest demand. Plaza Wired Ltd. and Motisons Jewellers Ltd., which raised Rs 71 crore and 151 crore, respectively, were subscribed over 150 times.

Among the large issuances, Tata Technologies Ltd. received the maximum demand, followed by Indian Renewable Energy Development Agency Ltd. and JSW Infrastructure Ltd.

Retail participation is conditional, and "will always be good only if prices are fairly valued and they are IPOs with decent amount of fresh issuances", Pandey said.

Post the listing of the stocks, IREDA gained the most at 243.3% from its issue price. This was followed by Cyient DLM Ltd. and Netweb Technologies India Ltd., according to Chittorgarh.

Shares of Radiant Cash Management Servcies Ltd., Yatra Online Ltd., and ASK Automotive Ltd. saw muted performance after listing.

The global IPO picture remained muted as volumes fell 8% and proceeds were down by 33%, compared with 2022, according to data from Ernst & Young.

While many governments are taking measures to boost IPOs, activity is particularly strong in high-growth economies, George Chan, EY Global IPO leader, said in a report.

"Before monetary policy eases and the geopolitical climate stabilises, IPO candidates should keep their eyes on building fundamentals and managing price expectations to capitalise on the fleeting windows as 2024 progresses."

Mataprasad Pandey expect this momentum to continue in terms of amount to be raised. "Continued FII buying, lower interest rate and populist budget ahead of general elections etc., may give opportunities to the companies to raise fresh capital for their capex."

Share sales by promoters of Indian companies more than doubled this year, as the markets scaled new highs. "If we observe most of the IPOs are of offer-for-sale nature, that is, not a fresh fund raise which is the only exit opportunity to existing shareholders," he said.