Main-board IPOs weather global headwinds, collect Rs 52,000-cr in 2023

The capital generated through mainboard IPOs dipped slightly to just over Rs 52,000 crore in 2023 amid global volatility driven by rising interest rates and geopolitical risks, while the number of issues rose. Experts maintain a strong bullish outlook on the IPO market for 2024.

Excluding LIC's blockbuster maiden public issue of Rs 20,557 crore in 2022, initial public offering (IPO) collection actually increased by 36 per cent this year.

Notably, mid and small-cap companies were in flavor this year, given the considerable tailwind in the markets.

The market environment for IPOs has been extremely robust in 2023, though the start of the year was tepid due to global headwinds.

"A key reason for the strong interest in IPOs has been an increased focus on profitability and reasonable pricing of deals, at least relative to prevailing higher valuation multiples in listed peers. Another strong pillar of the Indian market ecosystem is the robust yet efficient regulatory framework," said Mahavir Lunawat, Managing Director, Pantomath Capital Advisors.

V Prashant Rao, Director & Head - ECM, Investment Banking, Anand Rathi Advisors, believes that the momentum of 2023 will roll over to 2024 and that could be a golden period for Indian primary markets.

"We hold a strong bullish outlook on the IPO market in 2024. This optimism is buoyed by robust domestic and foreign investments, driven by superior growth prospects of the Indian markets. The inflows are expected to gain even more momentum once the uncertainties related to the elections are resolved," said Neha Agarwal - MD & Head, Equity Capital Markets, JM Financial.

Around 24 companies, which have already received clearance from the markets regulator Sebi but are yet to launch their IPOs, are looking to raise over Rs 26,000 crore.

Add to this, 32 more companies have filed their draft papers with Sebi and are awaiting clearances to mobilise more than Rs 35,000 crore, according to data provided by Prime Database.

Going by the industry data, as many as 58 maiden public issues have been floated this year to raise Rs 52,637 crore, including Rs 3,200-crore IPO of Nexus Select Trust REIT.

The fund mobilization in 2023 was lower than 40 companies raising Rs 59,302 crore last year. This was largely due to the Rs 20,557-crore LIC issue, which constituted as much as 35 per cent of the total amount raised during 2022.

Before that, 63 companies had mobilized Rs 1.2 lakh crore through the initial share sales in 2021, which was the best IPO year in two decades. This fundraising was driven by excessive liquidity and increased retail investor participation, which spurred a persistent euphoria in the primary market.

In the past three years, more than 150 mainboard IPOs have come for listing.

"Despite high global volatility due to rising interest rates and geopolitical risks, 2023 was a very good year for Indian IPO markets," JM Financial's Agarwal said.

Of the total 58 issues, 38 were floated during September and December.

The big size issues were missing in 2023 with an average ticket size of Rs 865 crore. The same was the case last year too. Except for LIC and Delhivery, the majority of the IPOs were in the sub-Rs 1,500 crore IPO category.

Mankind Pharma IPO (Rs 4,326 crore) was the largest issue of 2023, followed by Tata Technologies (Rs 3,042 crore), JSW Infrastructure (Rs 2,800 crore), RK Label (Rs 1,964 crore), and Cello World (Rs 1,900). The smallest IPO in the period was Plaza Wires, which raised Rs 67 crore.

"With the markets showing considerable tailwinds, the mid and small-cap companies are in flavour and will continue to rule the roost," Anand Rathi Advisors' Rao said.

Going public provides companies with extra funds for expansion, working capital, and debt repayment. It also boosts the company's visibility, attracting more business opportunities. Further, long-time investors often see the IPO as an exit strategy.

Interestingly, the IPO subscription ratio has been on the higher side this year, with some of the issues, including Motisons Jewellers, Plaza Wires, Utkarsh Small Finance Bank and ideaForge Technology getting subscribed more than 100 times.

The huge interest in IPO launches translated into listing gains as well. Of the companies listed this year, 47 companies are trading above their issue price and only four firms are trading below their issue price. Some of the firms gave positive gains ranging from 0.25 per cent to 228 per cent.

Sectors such as industrial, consumer discretionary, and healthcare continued to drive the IPO market. These sectors collectively cumulated to more than 50 per cent in terms of both the number of issues and the funds garnered. Additionally, technology and finance made significant contributions.

Apart from main-board IPOs, a spate of public offers was seen on the SME segment. A total of 175 Small and medium enterprises (SMEs) collected a record Rs 4,545 crore through the initial share sales this year, as compared to 109 such firms that collected Rs 1,875 crore in 2022. Before that, SME IPOs had garnered Rs 746 crore in 2021.

Interestingly, the magnitude of subscription rates in a dozen of companies was more than 300 times and around 51 companies witnessed subscription rates of more than 100 times. Further, the SME IPO index provided investors with a staggering 95 per cent return, FYERS Research said in its report.