year 2022: Slowdown in Dalal Street debutants and volatility triggered by geo-political tensions sour sentiments for primary markets Fund raising through IPOs to touch Rs 57,000 crore in 2022 and new year expected to be even quieter Is.
The total collection would have been much lower had it not been for the LIC public offer of Rs 20,557 crore, which is 35 per cent of the total amount raised during the year. Investors remained nervous till 2022 due to fears of recession amid rising inflation and rising interest rates.
“The year 2023 will be tough, with growth slowing globally, we are bound to see some fallout in India. I expect a slow or quiet market in 2023, and I suspect next year through IPOs The money earned will be more or less the same level as in 2022,” said Nikhil Kamath, co-founder of True Beacon and Zerodha.
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Vinod Nair, head of research at Geojit Financial Services, also believes that the overall size of IPOs in 2023 will remain muted in anticipation of a volatile stock market.
“There is a possibility that the premium valuation levels India may reduce in 2023 may impact the pricing of IPOs. The underperformance of recent IPOs will also impact investors, indicating a weak response in the near term. ,” she added.
As per the data provided by Prime Database, 36 companies have issued their initial public offerings (IPOs) to raise Rs 56,940 crore in 2022 (till December 16).
This figure will go up as the initial share sale of two companies – Keffin Technologies and Allin Electronics – is set to begin next week and will cumulatively raise Rs 1,975 crore. Fund raising in 2022 was less than Rs 1.2 lakh crore raised by 63 companies in 2021, which was the best IPO year in two decades.
The fundraising was driven by high liquidity and increased participation from retail investors, which fueled sustained enthusiasm in the primary market. Earlier, 15 companies raised Rs 26,611 crore through initial share sales in 2020.
Like last year, this year too most of the IPOs came through the Offer for Sale (OFS) route where existing investors were selling their stake in retail in some form or the other at relatively higher valuations.
Apart from the IPO, there was also a follow-on public offer by Ruchi Soya, which raised Rs 4,300 crore. An exceptional year for IPOs in 2021 exacerbated by rising geopolitical tensions, inflation and aggressive interest rate hikes contributed to lower fundraising from initial share sales in 2022.
Besides this, the dismal performance of some IPOs listed from 2021 onwards also affected fund collections, said Narendra Solanki, Head-Equity Research, Anand Rathi Shares & Stock Brokers.
Zerodha’s Kamath also said that the under-performance of recently listed public issues dented the interest of retail investors, leading to a decline in fund collections.
Russia-Ukraine War Effects
The war between Russia and Ukraine in February clouded the atmosphere for investors, causing panic in stock markets across the world, including India. To add to the misery, central banks around the world raised interest rates to curb rising inflation. This led to a reduction in liquidity, which in turn upset the sentiment in the primary market, affecting the pricing of shares and discouraging companies from opting for listing.
While LIC’s issue was the largest ever in the country at Rs 20,557 crore, followed by Delhivery (Rs 5,235 crore), Adani Wilmar (Rs 3,600 crore), Vedanta Fashion (Rs 3,149 crore) and Global Health (Rs 2,205 crore) Was. ,
Barring LIC and Delhivery, large-sized issues were missing in 2022, with an average ticket size of less than Rs 1,000 crore as the weak performance of the secondary and primary markets reduced appetite for larger offers.
Rajendra Naik, MD, investment banking at Centrum Capital, said the performance on the day of listing and buying of big-ticket IPOs was due to a decline in foreign portfolio investors (FPIs) participation.
Domestic investors such as mutual funds and PMS schemes, which largely replaced FPIs in Indian markets, took a more conservative stance and preferred to take short positions, and hence the departure of midcap IPOs in the Rs 500-1,500 crore range or Initially, some of these IPOs were oversubscribed several times.
Interestingly, only two out of 36 IPOs (Delhi and Traxon Technologies) were from new-age technology companies, clearly indicating a slowdown of issues from the sector after disastrous issues from Paytm and a few others.
The overall market response to the issues improved with only 14 IPOs receiving a mega response of more than 10 times. Harsha Engineers International was the top performer with a subscription of around 75 times, followed by Electronics Mart India (around 72 times) and DCX Systems (around 70 times).
FiveStar Business Finance was the only one that was not fully subscribed. The response was further muted by the listing performance of large companies such as LIC and Delhivery, which were trading 25 per cent below their respective issue prices.
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Apart from main-board IPOs, small and medium enterprises (SMEs) raised Rs 1,807 crore in 2021 as compared to Rs 746 crore raised by SME IPOs. With SEBI approval sitting and another 30 markets worth about Rs 51,215 crore awaiting regulatory nod.
Naik of Centrum Capital said factors such as economic policies, geopolitical tensions, valuations, investor sentiment and competition could determine the trend of the IPO market in 2023.
Technology firms, especially profitable, consumer, banking and financial, select manufacturing and infrastructure companies will raise massive funds through IPOs next year.