IPO Watch: Mainboard IPO space seems to be in lull in new fiscal yr. Analysts decode key reasons behind the fading buzz

The mainboard IPO market appears to be in a slump since no mainboard IPO is currently slated for April through June. Given that 2023 was the year of IPOs and that 2024 was off to an impressive start, one may wonder if the IPO frenzy has subsided as the lone IPO scheduled for the new fiscal year 2025 (FY24-25) was Bharti Hexacom. Investors seem to wonder if the current market volatility, election season, or other factors are to be blamed for a lull in the mainboard IPO space. 

By this Friday, April 12, with the Bharti Hexacom IPO listing, it would make a total of about 24 initial public offerings that have been listed on exchanges in 2024 so far. 

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Moving forward, no mainboard IPO is slated to start in April as of now, despite several companies being granted approval to launch their offerings from the capital market regulator, the Securities and Exchange Board of India (SEBI). 

Post SEBI's nod, the following companies are likely to be available for subscription soon: Akme Fintrade (India) Ltd, Western Carriers, Indegene, CJ Darcl, DEE Piping, Aadhar Housing Finance Ltd, and Kross Ltd.

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A startling 76 companies entered the public markets through mainboard IPOs in the fiscal year 2023–24 (FY24), collecting over ₹62,000 crore, a 19% rise from the previous fiscal year (FY23), according to a Pantomath analysis.

In FY24, businesses from an array of sectors were able to access the IPO market. Less than 5% of the total capital generated was raised by the typically powerful banking sector, which showed limited activity by raising just ₹9,655 crore. There weren't many new-age technology businesses either; Yatra, Mamaearth, and Zaggle were the only three to go public.

Even so, brokerages and market analysts predict that FY2025 will see a dynamic and lively IPO landscape, providing both firms and investors with interesting prospects. Let's take look at the opinions of market professionals about the present downturn or quiet period in the mainboard IPO space.

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Is the IPO frenzy over? 

Arun Kejriwal, founder of Kejriwal Research and Investment Services

The mainboard IPO appears to have taken a little pause for the current week, according to Arun Kejriwal. Maybe this could extend to a fortnight and we could see IPOs of the mainboard coming in the second fortnight of this month.

Things will become apparent in the next ten to fifteen days, according to Kejriwal. Additionally, Indegene, Akme Fintrade (India) Ltd, and Aadhar Housing Finance Ltd are said to be planning road shows after April 15, although all of this is speculation, expectation, and statements made by people in the market.

Arun also emphasised that, as of right now, nothing is expected till April 15. It's just that companies are unsure. Some businesses could be considering whether to open the IPO for subscription if an election is scheduled for one of those centres during those dates. 

“Between now and June, five to seven IPOs will be coming in; there is no doubt about that. That bunch of IPOs that we have seen happening in February and March are now things of the past, at least for two months. It's going to be much slower. There is a fatigue factor on the mainboard IPO as things have stretched,” explained Kejriwal. 

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Avinash Gorakshakar, Head-Research at Profitmart Securities

Gorakshakar emphasized that we need to be aware that the IPO market would be quiet moving ahead due to the election, which is set to begin on April 19. The market will be very volatile this time. Other than a few that have received clearance from SEBI, other companies would prefer to wait for the volatility to subside. There won't be as many IPOs entering the market until the first week of June.

Avinash added that most of the listings weren't very good as well. The euphoria that was initially in the market has come down. Post-listing is also another reason, as things are not like they were before. So, investors will be extremely cautious as well.  The momentum draws in most initial public offerings. But long-term investors hold on until the dust settles. 

Another factor Gorakshakar pointed out is that hardly retail investors would be interested in going for large-cap IPOs as the alpha to make money is also limited. 

“Frontline IPOs are not doing well, as they are priced to perfection. The SME IPOs are listing robustly, so there is more appetite. In most SME IPOs, there is more speculative demand, retail demand, so investors want to invest in SME IPOs at any cost. Although SEBI's warning was required, good companies will continue to do well in any way,” said Avinash.

Mahavir Lunawat, Managing Director, Pantomath Capital Advisors Pvt. Ltd

According to Mahavir, the primary market continues to be buoyant, even as the elections approach. Although Investors tend to be a bit cautious, based on the large funnel of available opportunities and domestic liquidity levels, quality stocks at the right value would continue to be in demand.

"Historical trends and market analysis, including insights from our "Recap 2024: Crystal Gaze 2025" report, suggest that this cautious approach is common in the lead-up to significant electoral events. It's noted that, despite this temporary election phase, the groundwork is being laid for substantial activity post-elections, with numerous companies poised to enter the market, indicating a resurgence of activity anticipated once the political climate stabilises and clarity is achieved," said Lunawat.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.