According to the most recent study from multinational professional services partnership firm Ernst & Young (EY), there is a robust pipeline for initial public offerings (IPOs) in the second half of calendar year (CY) 2023 and beyond in India.
In the first quarter of the calendar year 2023, approximately 15 companies have filed their draft red herring prospectus (DRHPs), compared to approximately 10 companies who did so in the fourth quarter of 2022. These include companies from a range of sectors, such as the consumer, pharmaceutical, technology, and financial services sectors.
In Q1 CY2023, four main market IPOs raised US$ 107 million in proceeds from the main markets, compared to US$ 995 million in Q1 2022, a drop of 89% in proceeds raised and an increase of 33% in the number of deals.
During Q1 CY2023, Divgi TorqTransfer Systems Pvt Ltd IPO, which raised $50 million, was the most profitable IPO in terms of proceeds, according to the report.
In Q1 2023, there were four initial public offerings, compared to three in Q1 2022, according to EY's analysis on IPO trends for the period.
"We continue to see robust activity in the private market wherein PE/VC investments in 2023 have started on a positive note with January 2023 investments being higher than the previous month by 30% in terms of value, though lower than Jan 2022 by 17%. The scarcity of larger rounds witnessed in 2022 is expected to continue into 2023, and investors are expected to be very selective," said EY in its report.
As compared to 31 IPOs in Q1 CY2022 that raised US$ 37 million, the small and medium-sized enterprises (SME) segment raised US$ 82 million via 38 IPOs in Q1 2023. This represents an increase of 23% in the number of deals and 123% in the amounts raised.
According to the report, despite the fact that a large portion of this was small-ticket IPOs, India ranked first globally in terms of the number of IPOs in Q1 CY2023.
Due to market conditions or the regulator's (SEBI) return of their offer paperwork in the most recent quarter, almost six companies have withdrawn their IPO files. Although there are various justifications for returning these offer documents, the regulator demands that the companies be fully compliant at the time of filing.
“The India IPO market has shown resilience and growth in Q1 CY2023, despite ongoing global uncertainties and relatively smaller issue size. The market's strength is a testament to the Indian economy's potential for growth. We expect IPO momentum to increase in the future, with domestic and international investors playing important roles,” said "Veenit Surana, Partner, EY India.
EY also believes that a number of recent amendments, including the disclosure of Key Performance Indicators (KPIs), the ability for confidential IPO filings, a committee of Independent Directors to recommend that the price band is justified based on quantitative factors, increased resale value, are in line with ongoing regulatory developments aimed at improving disclosures and market practises.
Although the IPO market has been sluggish, it is anticipated that the market will rebound and the volatile stock activity will stabilise.
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