The primary markets in India have been buzzing these days with many investors capitalising on the IPO (Initial Public Offering) boom. As the year 2022 draws to an end, it’s time to take stock (no pun intended) of the IPO market activity in 2022 and also evaluate IPO performance history.
After a record fundraising in 2021, the Indian IPO markets went through a fairly lean period during 2022. Nonetheless, some marquee companies such as Life Insurance Corporation of India (LIC) and Adani Wilmar got listed this year.
IPO performance has been satisfactory in 2022 so far. Out of 28 companies that made a debut during the year, 20 traded above their issue price as of December 02, 2022. Despite a tepid performance on the day of listing, Adani Wilmar emerged as the most successful debutant of the year 2022 so far. After closing at a discount of 3.9% on its listing day, it went on to generate 179% returns over its issue price as of December 02, 2022.
On the other hand, LIC has been the most disappointing IPO this year which has lost about a third of its value since listing.
How encouraging has the IPOs' history been?
Out of 100 companies listed since the pandemic, 68 still trade above their issue price and the market has been upbeat about 52 of them all throughout i.e. they listed at a premium and are still in the green.
IPO performance history
| Description | Number of companies |
| Companies listed since 2020 | 100 |
| Listed at premium | 70 |
| Listed at a premium and still in the green | 52 |
| Listed at a premium but now in the red | 17 |
| Listed at discount and still making a loss | 15 |
| Listed at discount but now in the green | 16 |
Note: Companies listed until November 30, 2022, have been considered
Performance data as on December 02, 2022
Which themes worked in the IPO market?
The Defence sector has outperformed in 2022, and many defence companies are now trading at their multi-year highs. And that’s not all, a defence PSU (Public Sector Undertaking), Mazagaon Dock Shipbuilders, a company that went public in October 2020, has been the best-performing IPO over the last two years on the basis of cumulative returns.
Besides this, a few others such as Paras Defence And Space Technologies and MTAR Technologies have been the biggest wealth creators within the universe of newly listed stocks.
And themes that didn’t impress IPO markets…
The ones that totally flopped—listed at discount and still haven’t surpassed their issue price are a mix of some new-age platform companies and some mature-slow-growth conventional businesses.
One97 Communications (Paytm), CarTrade Tech and Suryoday Small Finance Bank have been the most disappointing IPOs since 2020. All three companies debuted in 2021 and now trade at as much as 66%-70% discount to their respective issue prices.
Which sector mobilised the highest funds through IPOs?
Banking, Finance and Insurance (BFSI) has been the top fund raiser since the pandemic. Sunrise sectors such as Healthcare and Chemicals also garnered large sums through IPOs. This has been a heartening sight as it hints at the deepening of the Indian equity market.
IPO market: Sectoral breakdown of fund raising activity
Factors contributing to a huge retail participation in IPOs are:
What is the IPO market outlook for 2023?
With a fairly robust IPO performance so far, the IPO pipeline remains strong. According to media reports, SEBI has already cleared the Draft Red Herring Prospectus (DRHP) for over 50 companies and more than a couple dozen companies are awaiting SEBI’s approval.
A word of caution for IPO investors…
Some large institutional investors and early-stage start up investors have used the IPO route to cash in their investments at aggressive valuations. Not every IPO needs your attention—don’t apply blindly.
How can Ventura help you make the most of IPO market opportunities?
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