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IPO Fundraising In India At 13 Year High

29 Nov 2023

Introduction:

When a company issues its shares for the first time for public subscription, it is known as an Initial Public Offering (IPO). For investors, IPOs are excellent opportunities to acquire shares of growing companies and make high profits in the long term. Issuing companies help raise money for business expansion and gain a corporate identity.

After a bit of dullness during the COVID-19 pandemic, when companies feared taking fresh corporate steps, fundraising through IPOs has again gathered momentum. In 2021, Indian companies raised around 2.2 billion dollars through IPOs, making it the highest amount raised through IPOs since 2008. The year saw a flurry of IPOs launched into the market, with most of them oversubscribed by good margins.

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IPO fundraising fell by 50% in 2022

After a strong 2021, the IPO activity declined a bit in 2022. According to PRIME database – India’s top database on the primary capital markets – fundraising through mainboard IPOs in 2022 fell by almost 50% from Rs. 1,18,723 crores to Rs. 59,412 crores. The Life Insurance Corporation of India (LIC) IPO alone accounted for Rs. 20,557 crores or 35% of the total funds raised through IPOs in 2022.

The LIC IPO was the biggest in 2022 (and the overall as well) followed by the Delhivery IPO worth Rs. 5,235 crores and the Adani Willmar IPO worth Rs. 3,600 crores.

The main reason behind the muted IPO activity in 2022 was the highly volatile market conditions prevailing during a major part of the year. Most companies refrained from launching their IPOs during such times, so their focus shifted toward 2023.

The record may get overhauled in 2023

After a lacklustre 2022, the IPO fundraising has again gathered pace in 2023. Both Nifty and Sensex kept breaking their all-time high records, and this presented excellent opportunities for companies waiting in the bank to float their IPOs in the market. As a result, they received overwhelming responses from investors, with most of the issues getting oversubscribed by huge volumes.

Until June 2023, more than 80 IPOs have already been listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). This figure is up by 33% compared to the entire 2022, which saw the launch of only 60 mainboard and SME IPOs launch. These findings were recently published in Ernst and Young’s Global IPO Trends Report.

Even in 2021, only 63 IPO were reported to hit the markets. But the fundraising in 2023 isn’t equivalent to 2021 as most of the IPOs launched this year belonged to small and medium-scale enterprises (SMEs), and were hence, small-ticket IPOs.

However, going at the current pace and considering a slew of IPOs waiting to be launched in the second half of 2023, we can witness the record of 2021 getting overhauled by the end of this year. It needs to be noted that India is already at the top position in world rankings in terms of the number of IPOs launched in 2023 country-wise.

The Indian IPO graph at the global level also indicates a steady growth trajectory for the future. For example, it was 6% in 2021, then rose to 11% in 2022, and currently stands at 13% year-to-date in 2023.

What does it mean for investors?

There is strong momentum in the primary capital markets, with companies across sectors seeking to raise capital through IPOs. Many new-age companies and start-ups, backed by marquee investors, are in line to go public shortly, providing an excellent opportunity for retail investors to make quick money.

A record of participation by retail investors has also increased the excitement in the IPO markets. Some recently-launched public issues have even provided higher listing gains than the grey market premiums predicted. 

With some big names, such as Tata Technologies, National Securities Depository Limited (NSDL), JSW Infrastructure, and Concord Biotech, about to float their IPOs shortly, the market is poised for more thrill.

To conclude

2023 offers an excellent opportunity to buy shares of promising companies and make listing gains or long-term profits. However, don’t forget to check the issuing company’s fundamentals and other crucial factors before investing in an IPO. If you need a Demat account to invest in IPOs, you can open it for free with Motilal Oswal and enjoy many exciting features.

 

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