Post record Rs 1.1 trn FY22 IPO fundraise, next fiscal may set new record

54 companies plan to raise Rs 1.4 trillion in FY23 after 52 Indian corporates raised an all-time high Rs 1.11 trillion through initial public offers (IPOs) in FY22, Prime Database report said

After a blockbuster financial year 2021-22 (FY22) where 52 Indian corporates raised an all-time high Rs 1.11 trillion through initial public offers (IPOs), the momentum could well continue in FY23 and the amount raised could surpass the FY22 figure.

According to a note by Prime Database, 54 companies plan to raise a massive Rs 1.4 trillion (including the much awaited LIC IPO) and currently hold market regulator Securities and Exchange Board of India's (Sebi's) approval. Another 43 companies, the note said, are looking to raise about Rs 81,000 crore where Sebi approval is still awaited.

"The FY22 IPO amount was over 3.5 times Rs 31,268 crore raised through 30 IPOs in 2020-21. The previous best year was 2017-18 (FY18) where Rs 81,553 crore was raised. IPOs from new age loss-making technology startups, strong retail participation and huge listing gains were the other key highlights of 2021-22. Overall public equity fundraising, however, dropped to Rs 1.70 trillion from Rs 1.90 trillion in the preceding year," said Pranav Haldea, managing director, PRIME Database Group.

The largest IPO in 2021-22, which was also the largest Indian IPO ever, was of One 97 Communications (PayTM) for Rs 18,300 crore, followed by Zomato (Rs 9,375 crore), Star Health (Rs 6,019 crore), PB Fintech (Policybazaar; Rs 5,710 crore), Sona BLW (Rs 5,550 crore) and FSN E-Commerce (Nykaa; Rs 5,350 crore). Average listing gain was 33 per cent, in comparison to 36 per cent in 2020-21 and 24 per cent in 2019-20. Four out of the top six IPOs were from new age technology companies (NATCs), which together raised Rs 38,734 crore.

Funds raised

“Primary market activity in FY22 carried the momentum from the second half of FY21 with businesses across the spectrum going public. Retail investors, alongside institutional investors, provided the required amount of liquidity in the market through SIP contributions to asset management firms, proving adequate to absorb the capital requirements of companies. LIC IPO is poised to absorb a lot of capital market liquidity,” Karan Marwah, partner and head - capital markets, KPMG in India in a recent report with Sai Venkateshwaran.

Retail investors: The backbone

Retail investors were a force to reckon with. The average number of applications from the retail category was 14.05 lakh, the Prime Database report said, in comparison to 12.73 lakh in 2020-21 and 6.88 lakh in 2019-20. The highest number of applications from retail in 2021-22 were for Glenmark Life Sciences (33.95 lakh), followed by Devyani International (32.67 lakh) and Latent View (31.87 lakh).

“The amount of shares applied for by retail by value was 17 per cent higher than the total IPO mobilisation (147 per cent in 2020-21) showing the strength and interest of retail investors during the year. However, the total allocation to retail was just Rs 22,017 crore, which was 20 per cent of the total IPO mobilisation (down from 32 per cent in 2020-21),” the note said.

That said, analysts expect the secondary to remain choppy due to the ongoing geopolitical crisis between Russia and Ukraine. This, they feel, will have repercussions for the primary market activity as well.

“IPO activity is likely to remain muted at least for the next few weeks due to high volatility in the secondary market, mainly because of the Russia-Ukraine imbroglio. Additionally, the overall liquidity, especially from FPIs, has also taken a hit following rate hikes from global central banks,” Haldea said.

From a medium-term though, analysts still remain hopeful of a resolution of issues between the two warring nations. G Chokkalingam, founder and chief investment officer at Equinomics Research, for instance, said that the domestic equity market is unlikely to fall badly from the current levels.

“The Sensex may fluctuate in the range of 56,000 to 57,000 till a solution is found out for the Ukraine – Russia war,” he said.

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