On several counts, 2021 has been a truly exceptional and record breaking year for the Indian IPO market.
The fervour was so much during the course of the year, that even certain M&A scenarios gradually morphed into IPO mandates as promoters couldn't resist the mouth-watering valuations in the public markets.
Sample this headline stat for starters -
63 Indian corporates raised an all-time high Rs 1,18,704 crores through main board IPOs in 2021, according to data compiled by PRIME Database Group.
This record amount was nearly 4.5 times the Rs. 26,613 crores raised through 15 IPOs in 2020 and almost twice the previous best year of 2017, in which Rs. 68,827 crore was raised via the listing route.
IPOs from new age loss-making technology startups, strong retail participation and huge listing gains were the key highlights of the year, according to Pranav Haldea, Managing Director, PRIME Database Group.
So what led to the frenzy?
Dharmesh Mehta, Founder, DAM Capital says India went through a transformation phase post the outbreak of Covid-19, which benefitted tech companies as new business models evolved and prospered.
"India followed the global trend and the stock markets did exceedingly well hence record retail money came to the markets," said Mehta.
He further added, "I always believe supply brings in demand so the IPO supply led to unprecedented demand as everyone had cash but lack of avenues to invest, hence IPOs got record subscriptions."
The largest IPO in 2021, which was also the largest IPO ever in the history of the Indian IPO market, was from One 97 Communications (Paytm) for
Rs 18,300 crore. The average deal size was a high Rs 1,884 crore.
Retail investor euphoria
The average number of applications from the retail segment was 14.36 lakh, in comparison to 12.77 lakh in 2020 and 4.05 lakh in 2019. The highest number of applications from retail in 2021 was received by Glenmark Life Sciences (33.95 lakhs) followed by Devyani International (32.67 lakhs) and Latent View (31.87 lakhs).
Its all about the gains!
According to PRIME Database, of the 58 IPOs which have got listed thus far, 34 gave a return of over 10 percent (based on closing price on listing date). Sigachi Industries gave a return of 270 percent followed by Paras Defence (185 percent) and Latent View (148 percent). Forty of the 58 IPOs are trading above the issue price (closing price of December 22, 2021). The average listing gain was 32 percent, in comparison to 44 percent in 2020 and 19 percent in 2019.
The IPO split: primary vs secondary
Twenty five out of the 63 IPOs that hit the market had a prior PE/VC investment. Offers for sale by such PE/VC investors at Rs 24,106 crore accounted for 20 percent of the total IPO amount. Offers for sale by promoters at Rs 31,704 crore accounted for a further 27 percent of the IPO amount.
Interestingly, the amount of fresh capital raised in IPOs in 2021 stood at Rs 43,324 crore, which was greater than the last 8 years combined.
2021 also saw another record, in terms of the number of filings with SEBI. As many as 115 companies filed their offer document with SEBI for approval. According to Haldea, to put this in context, 2019 and 2020 cumulatively had a total of merely 50 filings.
IPO market: The road ahead
PRIME Database believes the domestic IPO pipeline remains strong with 35 companies holding SEBI approval proposing to raise roughly Rs 50,000 crore and another 33 companies awaiting SEBI approval to raise about Rs 60,000 crore. This excludes the much anticipated mega IPO of LIC, which is expected to be launched in this fiscal according to the government.
However, some market observers believe that the dismal debut of Paytm followed by the tepid response to the Star Health Insurance IPO ( both big issues) have made investors cautious.
They add that going ahead, investor sentiment in the secondary market would also be impacted by the rapid spread of the Omicron variant of Covid-19 and the possibility of global central banks withdrawing monetary stimulus earlier than expected.