IPOs have to be priced better, issuances to be up by 30% in 2023: Kotak's S Ramesh

Primary market activity, which took a backseat in 2022 amid volatility and global macro concerns, is set to bounce back by 30 percent in 2023 but IPOS will have to be priced better, Kotak Investment Banking (KIB) said on January 12, sharing its outlook for the year.

The initial public offering (IPO) pipeline of $9.5 billion is awaiting launch and offers worth $6.6 billion are waiting to get the approval of the Securities and Exchange Board of India, the firm said.

New-age tech companies fell out of favour and consumer, healthcare and financials took the centre stage in the IPO market of 2022.

"Given the major tech correction in global markets in CY22, investors will continue to focus on profitability in CY23," KIB Managing Director & CEO S Ramesh said.

Also Read: IPOs to look forward to in 2023

"IPOs will have to be priced better as we are now in a buyer's market. I believe recalibration between growth and profitability has been happening," he added.

The share price of a number of new-age tech companies like Zomato, Paytm and PB Fintech have more than halved since their listing, as investors dumped them over growing worries on cash burn and losses.

Pre-IPO shareholders, including high net-worth individuals and venture capital firms, have also booked profits and offloaded stakes in these counters.

On January 12, Alibaba affiliate Antfin sold 2 crore shares of Paytm and an undisclosed seller also offloaded some Nykaa stake. Both the counters have seen massive selling pressure since their lock-in expiry in November 2022.

Also Read: Paytm stocks suffer steep fall after 4.5% equity changes hands in block deal

In 2022, about 37 IPOs raised close to $7.6 billion, a big drop from 61 IPOs worth $16.5 billion in 2021. As many as 70 percent of the IPOs were below $150 million in 2022, KIB noted.

The advisory market is expected to touch $200 billion in the short to medium term. The year 2022 saw India's biggest deal ever with HDFC–HDFC Bank merger and the largest acquisition in the industrials space when the Adani Group acquired Holcim's India assets.

Total deal advisory activity grew to $185 billion from  $145 billion in CY21. About 70 percent of the total deal activity was concentrated in sectors such as industrials and autos, infrastructure and utilities, technology and new-age tech, KIB said.

Also Read: How do Nykaa's profitability goals look in light of increasing competition?

Exits also picked up significantly over CY20, according to KIB. "This has been primarily driven by IPOs in CY21 and secondary sale in CY22 with a total exit value of $51.9 billion combined in both years. This reflects the buoyancy and high valuations in capital markets," it noted.