IPO fund raising soars to 27-month high in August

In August alone, 25 companies filed draft red herring prospectuses with the Securities Board of India. In 2024 so far, 92 firms have filed draft red herring prospectuses (DRHP) with SEBI

The Indian IPO market, which got off to a slow start this year due to election-related uncertainty, has rebounded sharply, with 10 firms raising a total of Rs 17,048 crore in August, the highest in 27 months.

August's fundraising spree marked the strongest primary market activity since May 2022.
Around 57 percent of the funds raised in August -- about Rs 9,715 crore -- came from fresh issue capital while the balance Rs 7,333 crore was from offer for sale (OFS).

Analysts said that the rise in fundraising has been driven by strong economic activity, buoyant stock market, and company earnings beating expectations, encouraging more companies to go public.

While the first quarter was a bit slow for IPOs primarily due to domestic election activity, the period thereon saw activity picking up on the back of favourable political outcomes, prospects of policy continuity, pro-growth government measures, along with expectations of interest rate cut by the US Fed this month that is pushing financial markets globally, including in India.

“High liquidity, secondary market performance along with robust listing performance of recent IPOs is creating high investor confidence to participate in the initial public offerings,” said Prashanth Tapse, Senior VP - Research Analyst, Mehta Equities.

“Most of the issues are witnessing handsome subscription demand followed by healthy listing gains mainly on the back of reasonable ask valuations and favourable market conditions, giving promoters and investors confidence to raise and invest", added Tapse.

He further believes that promoters as well as pre-IPO investors like private equity investors are also looking at this market mood as an opportunity to encash with better-than-expected valuations giving them a chance to book profits.

Despite significant volatility, Indian markets hit record highs in August with the Nifty extending its winning streak to 14 consecutive sessions – a new record. The benchmark Sensex gained 0.8 percent while the Nifty was up 1.1 percent in August.

Meanwhile, Ola Electric Mobility led the IPOs in August, raising around Rs 6,145 crore, followed by Brainbees Solutions with Rs 4,193 crore and Premier Energies with Rs 2,830 crore.

Other notable IPOs included Ceigall India (Rs 1,253 crore), Bazaar Style Retail (Rs 835 crore), ECOS India Mobility & Hospitality (Rs 600 crore), and Interarch Building Products (Rs 600 crore).

Most IPOs are being oversubscribed on the first day as investors are drawn towards the primary market amidst high valuations in the secondary markets. Additionally, recent IPOs have delivered strong returns on their listing days, further attracting investors. Many IPOs are also trading at a grey market premium of 20-100 percent above their price band.

Among the most heavily subscribed IPOs in August, Unicommerce eSolutions led with a subscription of 168.35 times, followed by Orient Technologies at 155 times and Saraswati Saree Depot at 108 times. Other major IPOs included Premier Energies, ECOS India Mobility & Hospitality, and Akums Drugs and Pharmaceuticals, which were subscribed 75 times, 65 times, and 63 times, respectively.

In 2024 so far, 56 IPOs have raised Rs 65,000 crore, compared to just 20 IPOs raising a little over Rs 15,051 crore in the first eight months of 2023, with no offerings in January and February.

Many companies are showing renewed interest in launching their initial public offerings (IPOs). In August alone, 25 companies filed draft red herring prospectuses with the Securities Board of India. In 2024 so far, 92 firms have filed draft red herring prospectuses (DRHP) with SEBI, marking the highest number of filings since 2021, when 120 companies submitted draft papers.

Nirav Karkera, Head of Research, Fisdom said for nearly a decade, Indian startups have been a focal point for VC/PE investments. Over the years, many privately held Indian companies have raised substantial amounts of capital in exchange for equity. Several of these companies have successfully transformed into strong players within their respective industries.

With favorable market conditions and a robust growth outlook, it now appears to be an opportune time for early investors to exit via IPOs. A deeper look at cap tables and seller details through OFS will support the perspective and largely explain the wave of IPOs and the increasing share of OFS in these offerings, Karkera added.

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