What Subdued Listing Of Delhivery Indicate About Current State Of IPO Markets

Loss making Delhivery made a subdued stock market debut on Tuesday. The stock opened for trading at Rs 495 against its issue price of Rs 487 on the National Stock Exchange, marking an upside of 1.6 per cent. On the BSE, Delhivery shares opened for trading at Rs 493, up 1.2 per cent from issue price.

During the three-day share sale, which ended on May 13, Delhivery raised Rs 5,235 crore. The IPO comprised of fresh issue of Rs 4,000 crore and an offer for sale worth Rs 1,235 crore.

State Of IPO Markets

Delhivery's IPO came at a time when the domestic equity markets are going through a bout of volatility with the Sensex and Nifty falling over 10 per cent each from record highs hit in October last year.

Delhivery's IPO got subscribed 1.63 times by the last day of the issue. This compared with IPO subscription levels of other tech companies like MTAR Technologies, PB Fintech, Nazara Technologies, Zomato and Nykaa was much lower.

MTAR Technologies was subscribed a whopping 133 times, PB Fintech was subscribed 6.48 times, Zomato was subscribed 20.92 times, Nazara Technologies was booked 75 times and promoter of Nykaa - FSN Ecommerce Ventures was subscribed 35.91 times, data from the National Stock Exchange showed.

The current lull in IPO markets can be attributed to increasing cost of funds as investors are unwilling to pay a significant premium unless companies demonstrate growth and show signs of profitability, explained Tanushree Banerjee, co-head of research at Equitymaster.

"After the blockbuster listing of even mildly profitable and unprofitable businesses in 2021, the subdued IPO listing in 2022 suggest caution in the markets. Investors are unwilling to pay a significant premium unless companies demonstrate growth and show signs of profitability. With cost of capital moving up, IPOs may find takers only if the company fundamentals are sound and they are fairly valued," Banerjee told Outlook Business.

The volatility in markets, tight liquidity conditions and rising inflation are also some of the major factors for subdued IPO markets, analysts added. Investors have become cautious about equity markets across the world.

An EY report says that IPO activity in the Americas region declined by 72 per cent in the first quarter of 2022, whereas in the Asia-Pacific region, the decline was to the tune of 16 per cent, with 188 IPOs raising $42.7b in proceeds. A large number of companies across markets have either put their listing plans on hold or have settled with a smaller round of fund raising through listing.

"The entire markets are in a volatile state even IPO’s like LIC suffered in these market conditions. Usually, IPO subscriptions are based on the broader market sentiments and their listing depends on the GMP which is estimated by the demand in the market. Recently tech stocks like this are facing a huge sell off in the markets. The IPO markets may be weak going ahead amid rising inflation and rate hike situation by different central banks pulling out the liquidity," said Manoj Dalmia founder and director of Proficient Equities.