The mobilisation of funds through initial public offerings (IPO) dropped by 26 per cent to Rs 26,300 crore in the first half of FY2023-24 compared to Rs 35,456 crore in the same period a year ago, according to primedatabase.com, a primary capital market database.
Thirty-one Indian companies participated in the IPOs compared to 14 in the corresponding period of FY2022-23. However, excluding last year's LIC offer, IPO mobilisation rose 76 per cent from last year, it said in a report.
According to Pranav Haldea, managing director of PRIME Database Group, public fundraising increased by 69 per cent to Rs 73,747 crore from Rs 43,694 crore in the first half of FY2022-23.
Mankind Pharma was the largest IPO in the first half of 2023-24, raising Rs 4,326 crore, followed by JSW Infrastructure at Rs 2,800 crore and RR Kabel at Rs 1,964 crore. At the other end, the smallest IPO was from Plaza Wires at Rs 67 crore. According to the database, the average deal size was Rs 848 crore, and 21 out of 31 IPOs came in August and September.
Says Haldea in the report, "We have seen companies from multiple sectors tapping the IPO market in the last six months; one key sector missing was BFSI with just Rs 1,525 crore (or 6 per cent) being raised by companies from this sector (compared to 61 per cent in the same period last year). Also, just one of the 31 IPOs (Yatra) was from a new-age technology company, pointing towards a continuing slowdown in IPOs from this sector.
Of the 28 IPOs for which data is available presently, it said that 19 IPOs received a response of more than 10 times (of which 9 IPOs over 50 times), while 4 IPOs were oversubscribed by more than three times. The balance of five IPOs was oversubscribed between 1 and 3 times.
The retail investors' response increased tremendously compared to the first half of FY2022-23. The average number of retail applications increased to 10.02 lakh from 7.57 lakh in 2022-23. Ideaforge received the highest number of retail applications at 22.29 lakh, followed by Aeroflex at 21.62 lakh and SBFC Finance at 20.19 lakh.
The total value of shares applied by retail investors was Rs 55,516 crore, up 118 per cent compared with the total IPO mobilisation (compared to 33 per cent lower in 2022-23), showing a much higher level of enthusiasm from retail investors. However, it said the total allocation to retail was Rs 6,506 crore, an increase of 26 per cent of the entire IPO mobilisation.
According to Haldea, the IPO response was further buoyed by strong listing performance.
Average listing gain (based on the closing price on the listing date) rose 29.44 per cent compared to 11.56 per cent in the first half of FY2022-23. Of the 28 IPOs listed thus far, 20 returned over 10 per cent. Ideaforge gave a return of 93 per cent, followed by Utkarsh Small Finance Bank at 92 per cent) and Netweb Technologies at 82 per cent. In addition, 27 of the 28 IPOs are trading above the issue price (as per the closing price on October 3, 2023).
Furthermore, only 12 of 31 IPOs had a prior PE/VC investor who sold shares in the IPO. Offers for sale by such PE/VC investors at Rs 7,505 crore accounted for 29 per cent of the total IPO amount. On the other hand, it said that offers for sale by private promoters at Rs 5,063 crore accounted for another 19 per cent of the IPO amount.
Anchor investors subscribed to 36 per cent of the total public issue amount. Domestic mutual funds "played a slightly more dominant role" than foreign private investors (FPIs). The subscription amount of anchor investors accounted for 15 per cent of the issue amount compared to 14 per cent of FPIs. Additionally, qualified institutional buyers, including anchor investors, subscribed to 61 per cent of the total public issue amount.
Funds raised through infrastructure investment trusts (InvITs) and real estate investment trusts (ReITs) also saw a massive increase to Rs 8,426 crore (2 issues) from just Rs 416 crore in the same period last year. Regarding divestment, the offer for sale of Coal India, RVNL and SJVN dominated the scene in the first six months of FY2023-24, contributing Rs 6,881 crore (100 per cent) to the government.
The outlook remains positive. A total of 28 companies plan to raise Rs 38,000 crore, pending approval from the Securities and Exchange Board of India (Sebi), while 41 other companies are looking to raise about Rs 44,000 crore, awaiting Sebi approval. Haldea says the next 4-5 months will likely see several IPOs regardless of market volatility and the general elections.