Nearly 100 public offerings in 2023? Here’s how experts see IPO market performing next year

Initial public offerings (IPOs) are part of the primary market along with other issues such as preferential issues, bonus issues, and rights issues. However, for a new company to get listed and raise capital on stock exchanges then IPO is the route. There are two types of issues in the IPO market as well such as ‘fresh issue’ and ‘offer for sale’. Under the offer for sale, selling shareholders participate where they offload a portion of their stake in the company that is going to become public. That being said, IPOs pave way for the listing and trading of the company’s securities on Indian markets.

As per BSE data, a total of 88 IPOs have entered the market year-to-date. Of these, 36 IPOs were launched on the main board, while 52 IPOs on the SME segment. Also, BSE’s data revealed that, of the total, 72 firms have gained from their issue price, while 16 firms have recorded losses against their IPO issue price.

Some of the key performances of the IPO market in 2022 are — LIC with an issue size of ₹21,008 crore, followed by Delhivery at ₹5,235 crore, and Ruchi Soya Industries at ₹4,300 crore were the top 3 IPOs in value size. While in terms of subscriptions, the star performers with the most subscriptions were — Harsha Engineers International, Electronics Mart India, DCX Systems, Dreamfolks Services, and Campus Activewear. Also, a list of 4 firms such as Adani Wilmar, Venus Pipes & Tubes, Veranda Learning Solutions, and Hariom Pipes Industries even emerged as multi-baggers post-listing.

What to expect in 2023?

Subramanya SV, Co-founder & CEO of Fisdom said, Indian capital markets have been robust in the recent few months. He added, “We are seeing several IPOs getting completed with good post-listing performance as well. This robustness for IPOs will continue because these IPOs are being supported by domestic retail and institutional capital unlike earlier when capital markets relied heavily on foreign institutional investors. Flows into domestic mutual funds and vehicles like Alternate Investment Funds are strong.”

According to Gopal Kavalireddi, Head of Research at FYERS, as per primary market updates, more than 55 companies have received SEBI approval and are ready to launch their IPOs. TVS Supply Chain Solutions, Vikram Solar, Navi Technologies, Droom Technology, Sula Vineyards, Yatra Online, and Biba Fashions are well-known firms in the queue, with issue types ranging from entirely OFS to a mix of fresh equity and OFS. The issue size of the firms ranges from ₹90 crore to as high as ₹3000 crore.

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Additionally, somewhat 31 companies have submitted documents to SEBI for observations and approval. These are the likes of Snapdeal, Ebixcash, Joyalukkas, OYO, Go Digit General Insurance, Allied Blenders and Distillers, Mankind Pharma, etc.

Kavalireddi believes that in CY2023, based on the market environment, close to 100 IPOs with diversified offerings and sectors can be made available to retail and institutional investors. Many of them have a larger OFS size in comparison to fresh equity.

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Unlike earlier years, Kavalireddi stated that 2022 highlighted the preference of retail investors for less OFS-oriented IPOs and where the offer price provides the comfort of valuations and listing gains.

However, Fisdom’s CEO also explained the challenges, especially in the case of several startups which will be that they are currently on a high private market valuation benchmark that might be difficult to beat in the primary market issuance. He also added that global markets for technology and internet companies are not doing well. As a combination, many startups may not meet the valuation expectations set in 2021.

Nevertheless, Subramanya believes that the markets are ready for startups at reasonable valuations. However, he also stated that it needs to be seen whether the companies are ready for going public.

Overall, Subramanya concluded that “we will still have several startups going for an IPO in 2023. However, the quality of the issues and the pricing will change in 2023 because in the future IPOs will be based on different parameters delinked from the global markets.”

Whereas, Kavalireddi suggested that merchant bankers and promoters must work out appropriate pricing that leaves something on the table for new investors to be interested and subscribe. The valuation fiasco of the new-age tech companies of 2021- 22 is still fresh in investors’ minds.

“Hopefully, the debacle has provided sufficient learning for promoters seeking to raise funds via a public offering,” the FYERS expert lastly said.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.