IPO mart sees sharp slowdown in 1HFY23, fundraising drops 32% YoY

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As the stock market has been throwing tantrums in the current fiscal year, the number of promoters and shareholders tapping the capital market to raise money has also dwindled, data shows.

Data compiled by Prime Database revealed that 14 Indian corporates raised Rs 35,456 crore through main board initial public offers (IPOs) in the first half (April to September) of 2022-23. The amount raised is 32 percent less than Rs 51,979 crore raised through 25 IPOs in the corresponding period of 2021-22.

Lion’s share of the amount raised by corporates in the current fiscal so far – at Rs 20,557 crore or 58 percent of the total funds raised – was just in the IPO of Life Insurance Corporation (LIC) of India, the data shows.

Apart from LIC, other key IPOs in this period were Delhivery (Rs 5,235 crore) and Rainbow Children's (Rs 1,581 crore). Only one out of the 14 IPOs was a new age technology company pointing toward the slowdown in IPOs from this segment. The average deal size was Rs 2,533 crore.

Overall public equity fundraising – including SME IPOs, follow-on public offers (FPO), and qualified institutional placement (QIPs) – also dropped by 55 percent to Rs 41,919 crore from Rs 92,191 crore in the corresponding period of the previous year.

The overall response from investors, according to Prime Database, was moderate. Of the 14 IPOs, four received a response more than 10 times while three were subscribed by more than 3 times. The balance seven IPOs were subscribed between 1 to 3 times.

Average listing gain (based on the closing price on the listing date) fell to 12 percent, in comparison to 32 percent in 2021-22 and 42 percent in 2020-21. Of the 14 IPOs, six gave a return of over 10 percent. Harsha Engineers gave a stupendous return of 47 percent followed by Syrma SGS (42 percent) and Dreamfolks (42 percent). 11 of the 14 IPOs are trading above the issue price as of September 26, 2022.

Activity in this segment saw a huge increase in the first half of the current financial year with 62 SME IPOs collecting a total of Rs 1,078 crore in comparison to 30 IPOs in the same period in 2021-22 which collected Rs 346 crore. The largest SME IPO was of Rachana Infrastructure (Rs 72 crore).

Offers for Sale (OFS), which is for dilution of promoters’ holdings, saw a huge decrease, from Rs 11,511 crore raised in the first half of 2021-22 to just Rs 1,446 crore raised in the same period in 2022-23. The largest OFS was that of GR Infraprojects (Rs 855 crore). Meanwhile, six companies mobilized Rs 3,522 crore through QIPs, down 80 percent.

Activity in the SME segment saw a huge increase in the first half of the current financial year with 62 SME IPOs mobilising a total of Rs 1,078 crore in comparison to 30 IPOs in the same period in 2021-22 which collected Rs 346 crore. The largest SME IPO was of Rachana Infrastructure (Rs 72 crore).

Offers for Sale (OFS), which is for dilution of promoters’ holdings, saw a huge decrease, from Rs 11,511 crore raised in the first half of 2021-22 to just Rs 1,446 crore raised in the same period in 2022-23. The largest OFS was that of GR Infraprojects (Rs 855 crore). Meanwhile, six companies mobilised Rs 3,522 crore through QIPs, down 80 percent.

Outlook for 2nd half

Pranav Haldea, Managing Director, Prime Database Group, said, the pipeline continues to remain strong. As many as 71 companies proposing to raise Rs 1,05,000 crore are presently holding Sebi’s approval. Another 43 companies looking to raise about Rs 70,000 crore are awaiting Sebi approval. Out of these 114 companies, 10 are new-age tech companies which are looking to raise roughly Rs 35,000 crore.

“However, IPO activity will be impacted by the volatility in the secondary market, mainly because of recessionary fears and rising interest rates,” Haldea said. “IPO is a once-in-a-lifetime event for a company and, as seen several times in the past, companies would prefer to let their approval lapse rather than launching their IPO in a volatile market.”

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