Ideaforge Technology has turned out to be the first initial public offering (IPO) to get subscriptions more than 100 times since 2022. Experts attributed the performance to the impressive response from all sections of investors.
The drone maker may be enjoying the first-mover advantage from the drone-making industry and is expected to trade at expensive valuations, experts added.
The public issue of the drone manufacturing company was subscribed more than 106 times during June 26-30, getting more than Rs 33,000 crore worth of bids at the higher end of the price band of Rs 638-672 per share.
Qualified institutional investors (QIIs) were at the forefront as their reserved portion was booked 125.81 times, while the part set aside for retail investors and high networth individuals (HNIs) was subscribed over 85 times and 80 times, respectively.
The total fundraising planned by the unmanned aircraft systems maker via IPO was Rs 567 crore of which Rs 254.88 crore was already raised via anchor book on June 23, a day before opening the issue. The remaining Rs 312 crore issue opened for subscription during the current week ending June 30.
"Looking at the unique growth story in the drone industry, the company will continue to trade at expensive valuations. Listing gains are likely due to smaller issue size and likely scarcity premium," said SBI Securities.
In 2022, none of the IPOs were subscribed over 100 times, while in 2021, a total of 17 companies closed their public issues with over 100 times of subscriptions. A total of 65 IPOs worth over Rs 1.31 lakh crore hit the market in 2021.
Latent View Analytics and Paras Defence & Space Technologies IPOs saw the highest-ever subscription numbers till now. Their issues subscribed more than 300 times in 2021. IPOs by Tega Industries and MTAR Technologies in 2021 recorded subscriptions over 200 times, while Tatva Chintan Pharma Chem, Nazara Technologies, Easy Trip Planners and CE Info Systems' public offerings saw buying of 150-180 times their issue size.
IPOs With Over 100 Times Subscription Since 2007
Reasonable valuations, first-mover advantage, unique growth stories, and healthy market conditions with the availability of ample liquidity were some of the key reasons for the good performance of the primary market in 2021.
Overall, 2021 was a nice year for the equity markets, which saw the continuation of a rally from the Covid lows of 2020 to record highs in October 2021. The Nifty50 witnessed a 24 percent return in 2021.
In the current year, the market seems to have just started its bull run as Nifty closed above the 19,000 milestone and the BSE Sensex crossed the 64,000 mark on June 30 on the back of increasing FII interest after a pause in the rate hike cycle.
Market experts believe that the rest of the calendar year will be much better than the first half for the primary market. In 2023, so far 12 IPOs hit the primary market.
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"Based on the number of draft offer documents filed with SEBI, we expect the IPO market to remain vibrant in 2023," Hardick Bora, Co-Head of Equity at Union Asset Management Company said.
From 2014 to 2020, on average, 18 draft offer documents were filed in the first six months. The same jumped to 47 filings in the first half of 2021 and 65 filings during the same period in 2022. The first half of this calendar year has already seen 53 filings.
If equity market sentiments remain conducive, then the next six months should see healthy activity in primary markets, Bora believes.
Venkatraghavan S, Managing Director - Investment Banking at Equirus also expects to see slightly heightened IPO activity in the next six months.
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The primary market typically lags behind the secondary market by a few months, he said. Since the start of FY24, the markets have rallied significantly and the FIIs have returned to invest in Indian stocks.
"The expectation is that there would be close to Rs 50,000 crore raised. And most of it could happen in the remaining months of CY23. Given that 2024 is an election year, there could be a reversion to the cautious outlook in Q4 of FY24, with bouts of volatility," Venkatraghavan said.
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