Monetary tightening, inflation, recession fears, and muted listing performance cooled down activities in India’s primary market in 2022.

As much as 40 Indian companies raised Rs 59,412 crore through main board initial public offerings (IPO)s in 2022, as against Rs 1,18,723 crore (an all-time high) mobilised by 63 IPOs in 2021, according to Prime Database.

Of the total Rs 59,412 crore raised, Rs 20,557 crore or 35 percent of the amount raised in 2022 was by Life Insurance Corporation (LIC) alone. LIC was the largest IPO in 2022 – also the largest Indian IPO ever. This was followed by Delhivery (Rs 5,235 crore) and Adani Wilmar (Rs 3,600 crore). The average deal size was a high Rs 1,485 crore.

As many as 17 out of the 40 IPOs, or nearly half, came in the last 2 months of the year alone, which according to Pranav Haldea, Managing Director, PRIME Database Group, shows the volatile conditions prevalent through most of the year are not conducive for IPO activity.

Pointing towards the slowdown in the primary market, only one out of the 40 IPOs (Delhivery) was from a new age technology company (NATC) in comparison to 7 NATC IPOs raising Rs 42,826 crore in 2021) from this sector.

The overall response from the public was moderate, according to Prime Database. Of the 38 IPOs for which data is available presently, only 12 IPOs received a mega response of more than 10 times (of which two IPOs more than 50 times) while seven IPOs were oversubscribed by more than three times. The balance of 19 IPOs was oversubscribed one to three times.

In comparison to 2022, the response of retail investors also weakened. The average number of applications from retail dropped to just 5.92 lakh, in comparison to 14.25 lakh in 2021 and 12.77 lakh in 2020.

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The highest number of applications from retail were received by LIC (32.76 lakhs) followed by Harsha Engineers (23.86 lakhs) and Adani Wilmar (18.96 lakhs).

The number of shares applied for by retail by value (Rs 46,437 crore) was 22 percent lower than the total IPO mobilisation as against a 42 percent rise in 2021.

The total allocation to retail, however, was Rs 16,837 crore which was 28 percent of the total IPO mobilisation (up from 20 percent in 2021).

Moderate listing performance

The IPO response was muted further by moderate listing performance, according to Haldea. The average listing gain (based on the closing price on the listing date) fell to 10 percent, in comparison to 32.19 percent in 2021 and 43.82 percent in 2020. Of the 38 IPOs which have got listed thus far, 17 gave a return of over 10 percent.

DCX Systems gave a return of 49 percent followed by Harsha Engineers and Hariom Pipe Industries (47 percent each).

Some 23 of the 38 IPOs are trading above the issue price (closing price of 30th December, 2022).

The year 2022 saw 85 companies filing their offer document with Sebi for approval, in comparison to 128 last year. On the other hand, 27 companies looking to raise nearly Rs 37,000 crore let their approval lapse in 2022, and seven companies looking to raise Rs 4,200 crore withdrew their offer document.

IPOs outlook for 2023

The pipeline continues to remain strong. Some 54 companies proposing to raise a huge Rs 84,000 crore are presently holding Sebi approval. Another 33 companies looking to raise about Rs 57,000 crore are awaiting the Sebi approval. Out of these 87 companies, eight are NATCs which are looking to raise roughly Rs 29,000 crore.

The momentum seen in the last two months of 2022 is likely to continue, at least for the smaller-sized IPOs. However, it may be a while before we see larger-sized deals, especially in light of the lack of sustained interest from FPIs, Haldea said.

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