India's IPO mop-up so far sees sharp drop versus global peers in 2023

Domestic market share in amount raised globally falls to 0.9% versus five-year average of 2.9%

The amount of money Indian companies raised from the stock market has fallen faster than their global peers in 2023.

Indian companies raised $294 million in the first four months of 2023 (January through April) via initial public offerings (IPOs), according to data from tracker Refinitiv, a part of London Stock Exchange Group.

An IPO is when companies raise money from the public for the first time and list their shares on the stock exchange for trading. 

India’s IPO mop-up so far in 2023 is 80 per cent lower than the $1.5 billion raised in the corresponding period last year. By comparison, global markets have seen a 36 per cent decline.

Experts attribute global uncertainty and a drop in valuations to the sharp drop in fundraising activity this calendar year.

“Markets are uncertain due to global factors and rise in inflation. Not many wanted to launch their IPOs as they were not getting the right valuations promoters were looking for. While many offer documents got filed, not many issues got launched. Our primary markets don’t have the same level of depth or maturity as some of the developed markets. The IPO outlook will improve after the positive reception of some issues,” says Pranjal Srivastava, partner-equity capital markets (ECM), Centrum Capital.

India’s share in the amount raised globally has fallen to 0.9 per cent this year. It has averaged close to 2.9 per cent in the previous five years. The share was 5.2 per cent in 2022 — the highest since 2017’s 6.1 per cent.

Some believe ECM activity will bounce back as companies prepare to launch their IPOs.

“India is a bright spot in the global economic landscape. While the IPO activity has remained subdued, companies are using this period to be better prepared for launching their IPO early next year (before or after the general elections),” says Adarsh Ranka, financial accounting advisory services leader, partner, with Indian member firm of EY Global.

The same sector topped the fundraising table both in India and globally. High-tech companies accounted for 28.5 per cent of the total amount so far in 2023. They accounted for 42.4 per cent of the total amount raised in India. Industrial and materials are other sectors that were common in the top five in both India and around the globe.

A notable exception was power and energy. The sector accounted for 18.6 per cent of the money companies raised in 2023.

Indonesia’s Pertamina Geothermal Energy was among the major global listings. It listed in February after raising $596 million.

The share of the sector in Indian IPOs was zero per cent.

A total of 51 Indian companies will hit the market in 2023. This includes small and medium enterprises. There were 403 IPOs globally in the first four months of the year.