The liquidity-driven, record high rally in the secondary markets in 2021 also created a boom in the primary markets. The frenzy for initial public offerings is expected to continue in 2022, with the Life Insurance Corporation of India IPO expected to push the level of public issues to Rs 2 lakh crore, experts said.
2021 Performance
For the primary markets, 2021 was a record year, drawing more than Rs 1.3 lakh crore of investments via 65 initial public offerings. For the first time, retail investors got a chance to buy shares of new-age and consumer tech companies as well as startups. IPOs from Paytm, Zomato, Policybazaar, Nykaa (FSN E-Commerce Ventures) and Star Health generated optimism among investors, given their strong presence in the consumer market.
This was also a record year in terms of subscription figures, number of IPOs exceeding Rs 5,000 crore, and premium listings. Globally, too, it was a great year, given the availability of ample liquidity.
“The Indian IPO market was very robust in 2021 but it benefitted from a record high global IPO market,” said Abhay Agarwal, founder of Piper Serica Advisors. “At $17.5 billion of IPOs in 2021, India is still one-fifth the size of China and one-tenth the size of funds raised by the US IPOs.”
The overall global IPO market raised more than $450 billion in 2021, an increase of 67 percent over 2020, he said.
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“The interesting thing about the Indian IPO market is that for the first time, retail investors got to invest in consumer tech companies that were hitherto owned by private equity funds. Companies like Zomato, Nykaa, Policybazaar and Star Health have increased the investment options for long-term retail investors,” Agarwal added.
Expectations for 2022
The new year may also turn out to be a record-breaking one for IPOs, especially if the government launches the much-awaited share sale of Life Insurance Corporation, which could be Rs 70,000 crore to Rs 1 lakh crore, experts said.
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Several companies have received approval from the markets regulator to go ahead with their IPO plans, including Adani Wilmar, Go Airlines, ESDS Software, Skanray Technologies, Emcure Pharmaceuticals, Tracxn Technologies, Fusion Micro Finance, MobiKwik, Veeda Clinical, VLCC Health Care, Fincare Small Finance Bank, India1 Payments, Sterlite Power Transmission, Electronics Mart India, Puranik Builders, Prudent Corporate Advisory Services, Healthium Medtech, ESAF Small Finance Bank, Godavari Biorefineries, AGS Transact Technologies, Gemini Edibles and Fats, Utkarsh Small Finance Bank and Arohan Financial Services.
Companies awaiting approval include Snapdeal, Bharat FIH, Waaree Energies, eMudhra, Droom Technologies, API Holdings (Pharmeasy), Delhivery, Wellness Forever, OYO and Lava International.
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Offers by LIC, which is yet to file its draft prospectus, Go Airlines, MobiKwik, Adani Wilmar, Skanray Technologies, ESDS Software, Tracxn Technologies, VLCC Health Care, Prudent Corporate Advisory Services and Veeda Clinical may open during January-March 2022.
“IPOs worth around Rs 2 lakh crore are in the pipeline and expected in 2022. All eyes are on the mega IPO of LIC, which is expected to hit in the first quarter of 2022,” said Jay Prakash Gupta, founder of Dhan. “Major names like NSE, HDB Financial, Go Airlines and Pharmeasy are expected to get listed in 2022.”
Amit Pamnani, chief investment officer at Swastika Investmart, said LIC (Rs 70,000 crore), Delhivery (Rs 7,460 crore), Ola (Rs 7,300 crore), OYO (Rs 8,430 crore), Pharmeasy (Rs 6,250 crore), Bajaj Energy (Rs 5,450 crore), Go Airlines (Rs 3,600 crore), MobiKwik (Rs 1,900 crore), Ixigo (Rs 1,600 crore), NSE (Rs 10,000 crore), NSDL (Rs 1,300 crore), and Adani Wilmar (Rs 4,500 crore) are expected to hit in 2022.
Of these, IPOs for Go Airlines, MobiKwik, Pharmeasy, Delhivery and Adani Wilmar are most likely to open in January, while LIC’s offer may come out in March, Pamnani added.
On valuations, Divam Sharma, cofounder of Green Portfolio, said the LIC IPO is likely to come up with a valuation of Rs 8-10 lakh crore. Oyo is targeting a valuation of Rs 1 lakh crore, Delhivery Rs 40,000 crore, Adani Wilmar is expected to list at a valuation of Rs 40,000 crore, and Pharmeasy (API Holdings) is targeting a valuation of Rs 1-1.2 lakh crore.
“There is a continued interest from new-age companies to list and we expect more names to come up in 2022. We definitely expect 2022 to be a bigger year for IPOs than 2021,” he said.
Valuations Check
In the last quarter of 2021, the market turned volatile and lost more than 11 percent from record highs due to high valuations, Omicron concerns and tightening by the US Federal Reserve. IPOs from companies with high valuations, earnings volatility, or Covid-related concerns, including Paytm, Metro Brands, Star Health, Rategain Travel and Shriram Properties, failed to give reasonable returns to investors.
Experts advise investors not to get trapped in the frenzy and to check valuations and fundamentals before investing. Given the expected tightening of easy money policies by central banks, the market could be volatile in 2022, they said.
“IPOs since November have seen some fatigue setting in among investors, which has resulted in lacklustre performances post-listing,” said Unmesh Kulkarni, managing director at Julius Baer India. “Incrementally, it would be a bit challenging for the IPO markets to provide similar upside to investors as that witnessed in 2021, given the phenomenal run-up already in the markets, high valuations and the near-term headwinds.”
“With the Fed signalling rate hikes in 2022, liquidity may not be in abundance and markets are likely to be choppy and volatile. Retail investors must not jump for every IPO with an expectation of phenomenal listing gains,” said Gupta.
Yuvraj A Thakker, managing director of BP Wealth, said for this kind of IPO frenzy to continue, market momentum and sentiment will play a crucial role.
“We doubt such a frenzy can continue on a sustainable basis,” Thakker said.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.
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