Despite multiple headwinds in the last 2 years especially the start of the pandemic and in impact on growth as well as equity markets, a total 84 initial public offerings (IPOs) were listed in India between FY20-22. As per a recent report from the global accounting firm, KPMG, of these 84 IPOs, 81 of them cumulatively raised ₹1.52 lakh crore between FY20 and FY22 till date.
The study further noted that the number of issuances in the Indian primary markets in FY21, at 26, was twice the issuances witnessed in FY20.
"While the first half activity remained muted in FY21 owing to the pandemic with only three IPOs, the third and fourth quarters witnessed a flurry of activity. The third quarter witnessed nine listings and the fourth quarter recorded as many as 14 listings, equivalent to thenumber of IPOs in FY201," the report pointed out.
As per KPMG, the resurgence in capital raising could be attributed to the companies that had delayed their fund-raising process for the second half of the year along with the companies that brought forward their plans to go public, thereby capitalising on the reviving positive market sentiments post the initial pandemic-related ambiguities.
Meanwhile, the primary market activity in FY22 carried the momentum from the second half of FY21 with businesses across the spectrum going public, it added.
The number of issuances in 9 months of FY22, at 44, has already surpassed the combined issuances in FY21 at 26 and FY20 at 14.
Listings
The study also highlighted that IPOs listed in FY21 fared much better on the listing day versus the ones listed in FY20 and FY22 till date. Four of the 26 companies were listed at a premium in excess of 100 percent in FY21, compared to 1 in FY20 and 3 in the first 9 months of FY22, it added.
It revealed that less than half of the IPOs listed in the first 9 months of FY22 witnessed a premium of over 20 percent on the listing day whereas FY21 had half of the IPOs and FY20 had 43 percent of the IPOs generating the same returns.
“This highlights the stability in post-listing appetite of investors across the three financial years, despite the pandemic-ridden phases in FY21 and 9M FY22," KPMG commented.
The first quarter of the FY22 witnessed just 6 listings mainly due to the second wave of the pandemic, leading to a reassessment of the listing plans and volatility in the market. However, with the easing of restrictions in the second quarter, there was a renewed traction with 17 listings in the quarter and 12 in the third quarter, noted KPMG.
Also, it pointed out that 13 out of the 44 listings in 9 months of FY22 saw negative listing gains with 4 witnessing double-digit decline.
Meanwhile, the 26 companies listed in FY21 gave an average return of 36.2 percent and the 44 companies that got listed in the first nine months of FY22 witnessed an average of 26.2 percent, with 17 companies returning more than 25 percent of return, mentioned the report.
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Sector-wise
According to the KPMG study, focussing on double-digit listing gains across sectors; seven each belonged to the Chemicals and Industrials, Manufacturing and Metals (IMM) sectors with technology, media, and telecom sector at 8.
Meanwhile, 5 double-digit listings each belonged to the Financial Services and Healthcare with six belonging to the food and beverage sector.
While 11 stocks that listed at a discount belonged to the financial services sector between FY20-FY22 and two each from the IMM, Clothing and Apparel, Chemicals, Automotive and Real Estate sectors, it added.
Subscriptions
As per the study, 81 of the 84 IPOs witnessed a total subscription of ₹45.3 lakh crore, thereby recording an average subscription of around 58.7 times.
"The overall demand for IPOs in 9M FY22 was lower compared to FY21 and but higher than FY20. IPOs in 9M FY22 witnessed an average over-subscription of 54.9 times, a figure lower than that of IPOs in FY21, at 74.8 times. The FY20 IPOs were oversubscribed by 44.3 times on an average," noted KPMG.
The report further pointed out that 23 out of 81 companies that got listed below their offer price had a muted average over-subscription of 8.3 times. Of these companies, only 4 IPOs were oversubscribed more than 20 times.
Also, the 48 companies that listed at double-digit premiums saw an average over-subscription of 91.7 times while 8 of them witnessed only a single-digit over-subscription.
Outlook
At the end of nine months of FY22, the Indian equity market has witnessed 44 listings, surpassing the total listings in FY21 and FY20.
"This is not surprising given the traction in the capital markets and the positive sentiments driven by the vaccination drives across the country and re-opening of economy post the second wave of COVID-19 that again disrupted activities during the initial months of FY22, however, the rapid spread of omicron and the threat of new variants have increased the uncertainties," said KPMG.
But with innovation gaining prominence in this age of evolution, the start-up ecosystem has witnessed heightened activity with interest from big names in the Venture Capital and Private Equity space. The race for capital has intensified with businesses ever so willing to seek the attention of long-term investors, it added.
Further, the global geopolitical risks are making India a favourable destination for foreign investment with indications of stable returns. The long-term fundamentals of the Indian economy remain in place despite the persistent challenges presented by the pandemic, the report noted.
