LIC, Delhivery, Kfin Tech among IPO duds of FY23

• As the financial year 2022-23 comes to an end, we take a look at the journey of IPOs that were launched in the period.
• In FY23, 37 companies launched their IPOs, and share prices of 15 companies are trading below their issue price.
• IPO fundraising hit a nine-year low in the fourth quarter of 2022-23.

After a bumper year of initial public offerings (IPOs) in 2021, the primary market is no longer as attractive. The number of IPOs launched which were at 64 in 2021, dropped to 38 in 2022. In 2023 so far, only four IPOs have been launched.

As the financial year 2022-23 comes to an end, we take a look at the IPOs launched during the period and how they fared.

In FY23, 37 companies launched their IPOs, including Udayshivakumar Infra that’s yet to be listed. Few of these IPOs could sustain their issue prices. As many as 15 companies listed in the current financial year, are currently trading below their issue price.

Thanks to the volatility that seeped into the markets in the second half of last year, there was a long pause when IPOs were delayed. After a good showing in May, IPOs picked up only in the later part of the year. As many as 25 out of the 37 IPOs came in just three months of the year — May, November and December.

“This shows the volatile conditions prevalent through most of the year which are not conducive for IPO activity,” said Pranav Haldea, managing director at Prime Database Group.

In the fourth quarter of 2022-23, IPO fundraising hit a nine year low, as per data from Prime Database.

“It was the market rally (in 2021), which took the Nifty from the low of 7,511 in March 2020 to the high of 18,604 in October 2021. And that led to the boom in the primary market. This euphoric phase has ended,” Dr V K Vijayakumar, chief investment strategist at Geojit Financial Services told Business Insider India.

LIC among listed in FY23 that delivered no returns to investors so far

A large number of investors who had invested in India’s largest IPO ever, also had to suffer losses — bringing down the sentiment towards fresh issues. Shares of LIC slipped 40% from its issue price, and 37% from its listing price.

Volatile market conditions added to the stock’s performance. According to brokerage reports including CRISIL LIC owns 4% of the entire equity market and 2% of the bond market. So, every time the market or bond yields move, its fortunes change.

New-age technology company Delhivery is also among the duds that made no money for investors since listing and disappointed investors. While the company is still not profitable, its losses have reduced by four times in FY 2021-22 when compared to FY 2019-20.

A lot of experts attribute stock price crash in Delhivery and other new-age technology companies like Paytm, Zomato and Nykaa – to unsustainable valuations.

“It is normal that the irrational exuberance in the secondary market spills over to the IPO market, too, resulting in even unjustifiably-valued IPOs getting subscribed. This was what happened to the IPOs of Paytm, Zomato, Nykaa and other new age digital IPOs. The subsequent crash in these stocks to levels much lower than the issue price has brought sanity to the IPO market. Even in the present lacklustre IPO environment, fairly priced good IPOs will get subscribed. Quality and price are important,” added Vijayakumar.
Source: Prime Database

IPO fundraise in FY23 was less than half of FY22
As many as 37 Indian corporates raised ₹52,116 crore through main board IPOs in the financial year 2022-23. This is less than half of the ₹1,11,547 crore (all-time high) mobilized by 53 IPOs in 2021-22, according to Prime Database.

While the number of IPOs released in FY23 was lower than the IPO boom year of FY22, the average issue size of companies also lowered to ₹1,463 crore from ₹1,923 crore respectively.

During the financial year, offers for sale by private promoters at ₹6,373 crore accounted for 12% of the IPO amount while offers for sale by the government accounted for 40% of the IPO amount. On the other hand, the amount of fresh capital raised in IPOs in 2022-23 was ₹14,034 crore.

In FY23, fewer companies are venturing to raise funds either. As many as 68 companies filed their offer document with market regulator SEBI for approval, as compared to 144 FY22. This includes the first ever case of ‘pre-filing’ by Tata Play in December 2022, where draft papers are submitted to the SEBI, albeit confidentially.

Another Tata company to soon hit exchanges is Tata Technologies, a subsidiary of Tata Motors, that filed its papers with the market regulator SEBI in March, 2023. Another large company that could go public is Jio Financial Services (JFS), as RIL is working towards the demerger. The company has said that JFS will be listed on the stock exchanges, though the timeline is unknown.

IPO euphoria of 2021 may not repeat soon
Primary market in 2021 was at its peak with 64 mainboard IPOs launching in a year out of which majority of them listed on a positive note. In fact two companies Sigachi Industries and Paras Defence and Space Technologies hit the roof with 270% and 185% listing gains.

Analysts believe that markets might not see another IPO boom as seen in 2021, at least for the next one to two years due to low liquidity.

"I do not see the same level of IPO boom from 2021 to repeat anytime soon in the next 1-2 years because of lack of liquidity and challenging macro environment. Year 2021 and initial months of 2022 was when liquidity was very high during the pandemic that led to huge demand for IPOs, which is not the case right now. Besides, investors have also burned hands in IPO investments in the last couple of years, so strong fundamentals are key for any demand right now,” Sanjeev Hota, vice president, head of research at Sharekhan BNP Paribas, told Business Insider India.

However, Hota believes that companies with good business prospects and decent valuation that leaves room for investors to make money, may receive strong demand despite volatile market conditions.

While the primary market is quiet at the moment, analysts expect it to pick up during the end of the year when macro concerns like interest rates cycle and inflation are expected to cool off.


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