Primary market set for revival with $10.7 bn IPOs in pipeline

According to Prime Database, these companies could raise as much as $10.7 billion or ₹89,069 crore by selling their shares to the public and listing them on exchanges through IPOs in the coming six months.

Among the companies that have filed for IPOs, at least 41 have secured a nod from the Securities and Exchange Board of India (Sebi) and are likely to raise ₹50,940 crore from the public through IPOs.

Additionally, there are at least 30 companies that have filed offer documents and awaiting Sebi approval for their IPOs, aimed at raising around ₹38,129 crore, as per Prime Database.

Bankers and market experts are upbeat about prospects of primary market after a lull.

“IPOs priced over the last 1-2 quarters have seen strong participation from all categories - domestic & foreign institutional and retail investors. Headline number of IPOs have increased, however, most of the IPOs are in the sub-$150mm size range and large sized IPOs continue to elude markets," said Abhinav Bharti, head of equity capital markets, JP Morgan.

“The euphoria in the secondary market is paving the way for many new companies to explore an opportunity of listing," said Abhijit Tare, managing director & CEO, Motilal Oswal Investment Advisors Ltd. This secondary market boom is on the back of foreign institutional investors and domestic institutional investors chasing the same set of stocks and leading the index rally, this move in the mainstream market is leading the benefit to small and mid-cap stocks allowing reasonable valuation for listing to the newer companies. “I believe next 2-3 years are going to be very good for the IPO market, we may have a bumpy road in next 4-6 months though."

Some of the companies that have received Sebi approval for their IPOs are Ebixcash Ltd that plans to raise ₹6,000 crore, Tata Technologies Ltd ( ₹4,000 crore), Tata Play Ltd ( ₹2,500 crore), Navi Technologies Ltd ( ₹3,350 crore), and Indegene Ltd ( ₹3,200 crore).

“The IPO market in India is extremely robust currently," said Pinak Bhattacharyya, senior vice president-Head Corporate Finance, IIFL Securities Ltd.

“In the current calendar year, 14 IPOs have been completed raising an aggregate of ₹128 billion ($1.6 billion)," Bhattacharyya said.

Some of the companies that are awaiting SEBI approval for their IPOs include Oravel Stays Ltd (OYO Hotels) that aims to raise ₹ 8,430 crore, Go Digit General Insurance Ltd ( ₹3,500 crore), JSW Infrastructure Ltd ( ₹2,800 crore), Samhi Hotels Ltd ( ₹2,000 crore), and Muthoot Microfin Ltd ( ₹1,350 crore), according to PRIME Database.

“Most IPO companies have delivered stellar returns in the current calendar year. Out of the 11 IPOs in the first half of the current calendar, year, 73% are trading 30% above the listed price. The median stock price return since listing is 49% and the median subscription in the QIB, HNI and retail buckets have been 9.0x, 32.7x and 9.7x respectively," he added.

Utkarsh Small Finance Bank has displayed an impressive stock surge of 102% since its listing in July, surpassing its initial issue price of ₹25 per share. Similarly, Mankind Pharma’s stock has surged by 68% since its listing price of ₹1080 per share in May. Netweb Technologies India Limited has experienced a substantial increase of 70% in its stock value since its listing at ₹500 per share in July. Additionally, IdeaForge Technology has observed a commendable 43% rise in its stock price since its listing at ₹ 672 per share in June. These four IPOs have all outperformed the broader market since listing. The Nifty 50 is up 7% since the beginning of the year, while these four stocks are up by an average of 71%.

“The benchmark indices are at record highs, domestic stock markets are up around 14% this fiscal year, and since April, there have been a constant stream of initial public offers (IPOs), with more than 12 companies raising a combined total of ₹12,149 crore through IPOs," Mahavir Lunawat, Managing Director of mid-market investment bankers, Pantomath Capital Advisors.

“The primary market is seeing a resurgence due to the sustained recovery in the stock market. There is a lot of buying interest in SME IPOs suggests that small and medium-sized enterprises are also seeing strong demand for their IPOs," said Kranthi Bathini, Equity Strategist at WealthMills Securities Pvt Ltd.

“Prior to this, the anchor lock-up was split into two parts last year with 30 days for 50% of anchor allotment and 90 days for remaining 50%. In order to lend higher flexibility for participation in non-institutional category, the non-institutional category has been split into 1/3rd for ₹2 lakhs – ₹10 lakhs bid size and 2/3rd for above ₹10 lakhs bid size," said Abhinav Bharti.

“Considering the momentum that the primary market has achieved in the last 6 months, the H2 2023 looks very optimistic of investors, however, they need to proceed with cautions as high value IPOs have been known to disappoint," said Lunawat.

“India has been a recipient of strong and sustained FII inflows – almost $20 Bn from March of this year aided by expectations of an end to rate hikes. Continued inflows in to Mutual Funds have also played a significant role in interest in the IPO market over the last 3 months where large mutual funds are regular anchors," said Bhattacharyya.