2022 in review - IPO Market

The initial Public Offering (IPO) market was a mixed bag for investors in 2022, while 2021 was a record-breaking year for the IPO market. Indian companies raised a staggering Rs 1.2 lakh crore in 2021, and the number nearly halved in 2022 to Rs 58,000 crore. The total IPO count (mainline) reduced from 63 in 2021 to 41 in 2022. 

Do these numbers suggest anything? What should investors expect from the IPO market in 2023? We will look at answers to these questions in this article.

IPO subscription: Comparison 2021 v/s 2022

The IPO subscription refers to the number of times the IPO has been subscribed at the stock exchanges (BSE and NSE). Why is the subscription number crucial? 

Below are a few insights that investors can draw from subscription levels:

• It tells the IPO (company shares) demand in the market. The rule of thumb is that the higher the demand, the better the chances of high IPO listing gains.
• The grey market premium demand is also directly related to subscription data.
• You can look at interest from QIB and NII to evaluate how seasoned investors are looking at the IPO.

Let us see what went wrong in 2022. Companies with the top three IPO subscriptions in 2022 were:

These are good numbers but compared to 2021, they look weaker. Below are the top three subscriptions for 2021:

More than ten companies had their IPOs oversubscribed by more than 100 times. The subscription level also depends on the size of the issue. If the issue size is small, and more people are interested, the subscription goes up automatically. 

Let us see if that was the reason for the difference in subscription levels between the two years. The average issue size of the top 3 companies for 2022 was Rs 585 crore, while the average issue size of the top 3 companies for 2021 was Rs 463 crore. Yes, the average issue size was smaller in 2021, but even if we factor that in, the subscription levels were comparatively lower than in 2021.

If the IPOs are not getting heavily subscribed, we can draw the following conclusions:

• No good companies are coming up with IPOs
• Investors have lost interest in the IPOs - it could be for N different reasons
• The valuations are higher

Listing Day Gains 2022 v/s 2021

We have already established that the subscription levels were lower in 2022. The direct impact of it was visible in the listing day gains. Below are the top five companies with their listing day gains for 2022:

1. DCX Systems - 49.18%
2. Harsha Engineers International Ltd - 47.24%
3. Hariom Pipe Industries Limited - 46.86%
4. Electronics Mart India Limited - 43.14%
5. Syrma SGS Technology Ltd - 42.30%

 For 2021:

1. Sigachi Industries Limited - 270.40%
2. Paras Defence & Space Technologies Limited - 185%
3. Latent View Analytics Limited - 148.02
4. Tatva Chintan Pharma Chem Ltd - 113.32%
5. Indigo Paints Limited - 109.31%

The listing gains of companies in 2021 were way superior to those in 2022. In 2022, we had only a few companies that delivered multibagger returns to investors. We will try to know the reasons later.

Worst and best-performing IPOs of 2022

In 2022, we saw some big companies list on the exchanges - LIC & Delhivery. However, these were also the worst-performing IPOs for 2022. Shares of Delhivery, LIC, and AGS Transact Technology are trading at a loss of 20% or more.

There were some positives as well. Some companies from 2022 have turned out to be multibaggers for investors. Companies like  Hariom Pipe Industries and Venus Pipes & Tubes have given exceptional returns to investors.

Why did IPOs not perform well in 2022?

In 2022, the overall market was down, and NIFTY50 returns were less than 5% compared to 24% in 2021. It was reflected in the IPO market. Some reasons why the IPO market underperformed were geopolitical tension, inflation worries in India, and aggressive interest rate hikes by the central bank. 

Even though 2021 was an exceptional year for IPO investors, there were many companies whose share prices crashed post the listing, and investors lost money. It has deterred investors' sentiment. Also, valuation became the topic of discussion in small and large investor communities, and companies with higher valuations saw less participation.

 What should we expect from the IPO market in 2023?

We have entered a new year, and many companies are waiting for the right environment to launch their initial public offering (IPO). As per experts, investors can expect over 100 companies in CY23 - the focus will be on companies from defense, consumer goods, and other innovative industries. As per the available data, more than 55 companies have received SEBI approval and are ready to launch their IPOs in 2023.

Which company's IPO are you looking forward to?

Source: Chittorgarh.com

Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Ms. Mamta Shetty, Contact number: 022-40701022, E-mail address: complianceofficer@icicisecurities.com. Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Such representations are not indicative of future results. The securities quoted are exemplary and are not recommendatory. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.