IPO fund raising halves in 2022, 40 IPOs gave an average listing gain of 10% only

Only 40 Indian corporates raised Rs 59,412 crore through main board initial public offerings in calendar year 2022, half of the Rs 1,18,723 crore (all-time high) mobilized by 63 IPOs in 2021, according to data analysed by primedatabase.com. Of the amount raised, Rs 20,557 crore or 35 per cent of the amount raised in 2022 was by Life Insurance Corporation alone.
Overall public equity fundraising also dropped by 55 per cent to Rs 90,995 crore from Rs 2,02,048 crore in 2021.
The largest IPO in 2022, which was also the largest Indian IPO ever, was from Life Insurance Corp.of India. 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 shows the volatile conditions prevalent through most of the year which are not conducive for IPO activity, said Pranav Haldea, Managing Director, PRIME Database.
Only 1 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). This implies a slowdown in IPOs from this sector.
The overall response from the public was moderate. Of the 38 IPOs for which data is available currently, 12 IPOs received a mega response of more than 10 times (of which 2 IPOs more than 50 times) while 7 IPOs were oversubscribed by more than 3 times. The balance 19 IPOs were oversubscribed between 1 to 3 times. The new HNI segment (Rs 2- Rs 10 lakh) saw an encouraging response with 11 IPOs receiving a response of more than 10 times from this segment.
The average number of applications from retail dropped to just 5.92 lakh in 2022, in comparison to 14.25 lakh in 2021 and 12.77 lakh in 2020. 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 amount of shares applied for by retail by value (Rs 46,437 crore) was 22 per cent lower than the total IPO mobilisation (in comparison to being 42 per cent higher in 2021) showing the lower level of enthusiasm from retail during the period. The total allocation to retail, however, was Rs 16,837 crore which was 28 per cent of the total IPO mobilisation (up from 20 per cent in 2021).
According to Haldea, IPO response was further muted by moderate listing performance.
Average listing gain (based on closing price on listing date) fell to 10 per cent, in comparison to 32.19 per cent in 2021 and 43.82 per cent in 2020.
Of the 38 IPOs which have got listed thus far, 17 gave a return of over 10 per cent.
DCX Systems gave a stupendous return of 49 per cent followed Harsha Engineers and Hariom Pipe Industries (47 per cent each). 23 of the 38 IPOs are trading above the issue price (closing price of 30th December, 2022).
Only 14 out of the 40 IPOs that hit the market had a prior PE/VC investor who sold shares in the IPO.
Offers for sale by such PE/VC investors at Rs 7,821 crore accounted for 13 per cent of the total IPO amount. Offers for sale by private promoters at Rs 8,623 crore accounted for 15 per cent of the IPO amount while offers for sale by the Govt. accounted for 35 per cent of the IPO amount. On the other hand, the amount of fresh capital raised in IPOs in 2022 was Rs 17,662 crore.
Anchor investors collectively subscribed to 32 per cent of the total public issue amount.
Domestic Mutual Funds played a more dominant role than FPIs as anchor investors with their subscription amounting to 15 per cent of the issue amount with FPIs at 12 percent.
Qualified Institutional Buyers (including Anchors Investors) as a whole subscribed to 57 per cent of the total public issue amount. FPIs, on an overall basis, as anchors and QIB, subscribed to 21 per cent of the issue amount, again slightly lower than MFs at 22 per cent.
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 7 companies looking to raise Rs 4,200 crore withdrew their offer document.
Outlook for 2023
The pipeline continues to remain strong. 54 companies proposing to raise Rs 84,000 crore currently have Sebi's approval for an IPO this year. Another 33 companies looking to raise about Rs 57,000 crore are awaiting SEBI approval (Out of these 87 companies, 8 are NATCs which are looking to raise roughly Rs 29,000 crore).
According to Haldea, the momentum seen in the last 2 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 lack of sustained interest from FPIs.
SME IPOs: Activity in this segment saw a huge increase in calendar year 2022 with 109 SME IPOs collecting a total of Rs 1,874* crore in comparison to 59 IPOs in 2021 which collected Rs 746 crore. The largest SME IPO was of Rachana Infrastructure (₹72 crore). One company (DJ Mediaprint & Logistics) also mobilized Rs. 14 crore through SME FPO.
OFS (SE): According to primedatabase.com, Offers for Sale through Stock Exchanges (OFS), which is for dilution of promoters’ holdings, also saw a huge decrease, from Rs 22,912 crore raised in calendar year 2021 to just Rs 11,269 crore raised in 2022. Of this, the Government’s divestment accounted for Rs 9,646 crore or 86 per cent of the overall amount. The largest OFS was that of Axis Bank (Rs 3,876 crore). OFS accounted for 12 per cent of the year’s public equity markets mobilization.
FPOs: FPOs made a comeback with Ruchi Soya Industries mobilizing Rs 4,300 crore. According to Haldea, this is just the second FPO in the last 8 years (since 2015) which shows how FPOs have fallen out of favour in comparison to other follow on fund raising routes.
QIPs were dominated by real estate, hotels, resorts, restaurants and tourism and financial services companies with them accounting for 88% (Rs 10,289 crore) of the overall amount, the report said.
14 companies mobilized Rs 11,743 crore through QIPs during 2022, which was 72% lower than Rs 41,997 crore raised in 2021. The largest QIP of 2022 was from Macrotech Developers.