IPO fundraising drops by 32% in the first half of FY23

Fourteen Indian corporates raised Rs 35,456 crore through main board IPOs in the first half (April to September) of 2022-23, according to Prime Database.

The amount raised is 32 per cent lower than the Rs 51,979 crore raised through 25 IPOs in the corresponding period of 2021-22.

Rs 20,557 crore or 58 per cent of the amount was raised just in the IPO of LIC, according to Pranav Haldea, Managing Director, PRIME Database Group.

Overall public equity fundraising also dropped by 55 per cent to Rs 41,919 crore from Rs 92,191 crore in the corresponding period of the previous year.

The largest IPO in this period, which was also the largest Indian IPO ever, was from Life Insurance Corp. of India for Rs 20,557 crore. This was followed by Delhivery (Rs 5,235 crore) and Rainbow Children's (Rs 1,581 crore). Only 1 out of the 14 IPOs (Delhivery) was from a new age technology company (NATC) pointing towards the slowdown in IPOs from this sector. The average deal size was a high Rs 2,533 crore.

The overall response from the public, according to Prime Database, was moderate. Of the 14 IPOs, 4 IPOs received a mega response of more than 10 times (of which 1 IPO more than 50 times) while 3 IPOs were oversubscribed by more than 3 times.

The balance 7 IPOs were oversubscribed between 1 to 3 times. The new HNI segment saw an encouraging response with 5 IPOs receiving a response of more than 10 times.

In comparison to 2021-22, the response of retail investors also moderated. The average number of applications from retail dropped to 7.57 lakh, in comparison to 15.56 lakh in 2021-22 and 12.49 lakh in 2020-21. The highest number of applications from retail were received by LIC (32.76 lakhs) followed by Harsha Engineers (23.86 lakhs) and Campus Activewear (17.27 lakhs).

According to Haldea, the amount of shares applied for by retail by value (Rs 23,880 crore) was 32 per cent lower than the total IPO mobilisation (in comparison to being 41 per cent higher in 2021-22) showing the lower enthusiasm from retail during the period. The total allocation to retail was Rs 9,841 crore which was 28 per cent of the total IPO mobilisation (slightly up from 23 per cent in 2021-22).

According to Haldea, IPO response was further muted by moderate listing performance. Average listing gain (based on closing price on listing date) fell to 12 per cent, in comparison to 32 per cent in 2021-22 and 42 per cent in 2020-21.

Of the 14 IPOs, six gave a return of over 10 per cent. Harsha Engineers gave a stupendous return of 47 per cent followed by Syrma SGS (42 per cent) and Dreamfolks (42 per cent). 11 of the 14 IPOs are trading above the issue price (closing price of 26th September, 2022).

Only four out of the 14 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 3,349 crore accounted for just 9 per cent of the total IPO amount. Offers for sale by promoters at Rs 2,206 crore accounted for a further 6 per cent of the IPO amount. On the other hand, the amount of fresh capital raised in IPOs in 2022-23 was Rs 8,641 crore.

The first half of the current financial year 2022-23 saw 41 companies filing their offer documents with SEBI for approval, in comparison to 87 last year.