Markets

India Inc’s IPO activity at record high in FY22

BL Mumbai Bureau | | Updated on: Mar 28, 2022

Market debut likely to remain muted for the next few weeks due to high volatility 

Fundraising through an initial public offering (IPO) was at its highest ever in a fiscal in the financial year 2021-22, according to data released by Prime Database

As per Pranav Haldea, Managing Director, PRIME Database Group, 52 Indian corporates raised an all-time high of ₹1,11,417 crore through the mainboard IPOs in the financial year 2021-22 even as the last quarter witnessed only five IPOs. The IPO amount for 2021-22was over 3.5 times of ₹31,268 crore raised through 30 IPOs in 2020-21. The previous best year was 2017-18 in which ₹81,553 crore was raised.

Key highlights

“IPOs from new-age loss-making technology start-ups, strong retail participation and huge listing gains were the other key highlights of 2021-22,” as per Haldea.

The year saw a record number of filings with SEBI with as many as 137 companies filing their offer documents with the regulator for approval. 

“To put this in context, 2019-20 and 2020-21 cumulatively had a total of just 59 filings,” as per Haldea. The overall public equity fundraising, however, was down to ₹1.70-lakh crore from ₹1.90-lakh crore in the preceding year.

Key trends

The fiscal 2021-22 recorded the largest Indian IPO ever, from One 97 Communications (Paytm) for ₹18,300 crore. Overall, four out of the top six IPOs were from new-age technology companies (NATCs) which together raised ₹38,734 crore. The average deal size stood at ₹2,143 crore.

In terms of public response, of the 50 IPOs (barring  Uma Exports and Veranda Learning Solutions) for which data was available, 29 IPOs received a mega response of more than 10 times (of which five IPOs more than 100 times); while eight IPOs were oversubscribed by more than three times. The remaining 13 IPOs were oversubscribed between one and three times.

The year also witnessed a tremendous response from retail investors, as per Haldea. The average number of applications from retail was 14.05 lakh as against 12.73 lakh in 2020-21 and 6.88 lakh in 2019-20. The number of shares applied for by retail by value was 17 per cent higher than the total IPO mobilisation (147 per cent in 2020-21). However, the total allocation to retail was ₹22,017 crore which was 20 per cent of the total IPO mobilisation (down from 32 per cent in 2020-21).

According to Haldea, the success of the IPOs was further buoyed by strong listing performance. Of the 50 IPOs which have been listed thus far, 30 gave a return of over 10 per cent (based on the closing price on the listing date). 

PE/VC investors

Separately, 22 out of the 52 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 stood at ₹25,207 crore, accounting for 23 per cent of the total IPO amount while OFS by promoters was at ₹33,258 crore, a further 30 per cent of the IPO amount. Though, the amount of fresh capital raised in IPOs in 2021-22 was quite high at ₹40,459 crore, which was greater than the last five years combined. 

Anchor investors collectively subscribed to 39 per cent of the total public issue amount. “FPIs played a dominant role as anchor investors, with their subscription amounting to 25 per cent of the issue amount followed by MFs at 11 per cent,” as per Haldea.

Overall, qualified Institutional Buyers (including Anchors Investors) as a whole subscribed to 71 per cent of the total public issue amount, based on data for 50 companies for which QIB and anchor investors data was available. FPIs, on an overall basis, as anchors and QIB, subscribed to 31 per cent of the issue amount followed by MFs at 16 per cent.

Volatility expected ahead

Moving forward, in 2022-23, 54 companies proposing to raise ₹1,40,000 crore (including the much anticipated LIC IPO) are presently holding SEBI approval. Further, 43 companies looking to raise about ₹81,000 crore are awaiting SEBI approval. Of these 97 companies, seven are new-age technology companies looking to raise ₹30,000 crore.

However, according to Haldea, “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.”

Published on March 28, 2022
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