Excessive liquidity and increased retail investor participation ensured a persistent euphoria in the Initial Public Offer (IPO) space wherein companies mopped up more than Rs 1.2 lakh crore this year even as pandemic gloom shadowed the broader economy.
Initial share sales are set to dazzle the Dalal Street in 2022 too as companies are expected to garner up to Rs 1.5 lakh crore in the New Year, continuing with the bullish momentum after 2021 turned out to be the best IPO year in two decades for the Indian market. Excessive liquidity and increased retail investor participation ensured a persistent euphoria in the Initial Public Offer (IPO) space wherein companies mopped up more than Rs 1.2 lakh crore this year even as pandemic gloom shadowed the broader economy.
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In 2022, the higher amount of funds through the primary market will be largely driven by the mega IPO of state-owned Life Insurance Corp (LIC). Besides, a lot of new-age digital players are expected to explore initial share sales. All said, the possible impact of the coronavirus pandemic, especially with the emergence of Omicron, might still be a cause for concern.
Venkatraghavan S, Managing Director and Head - Equity Capital Markets at Equirus, said that with interest rates set to move up, there might be some dampening of the current frenzy. "But, we don't expect a wholesale collapse of the primary market for equities. Any pandemic-related alarms could of course throw a spanner in the works". For calendar year 2022, he said that since LIC listing is also expected, it is anticipated that the amount raised through IPOs will be in the range of Rs 1.25 to 1.5 lakh crore.
Sandeep Bhardwaj, CEO of Retail at IIFL Securities, said 2022 might see new record funds raised through IPOs and added that LIC is likely to be the mother of all IPOs in India and will also significantly attract global investors' attention. India recorded the "best IPO year" in two decades with proceeds worth over USD 16.9 billion in 2021 as ample global liquidity, robust earnings and increased retail participation bolstered the initial share sales space, according to a report by global consultancy EY.
Prashant Singhal, Emerging Markets, Technology, Media, Telecom (TMT) Leader at EY, said this year has seen some of the best performances in the Indian IPO market with new age tech companies leading the way. According to him, good traction was also seen in diversified and industrial products and consumer products and retail sectors. "Investor sentiment remains upbeat as 2021 comes to a close with strong domestic and global demand and significant momentum going into 2022".
On the flip side, there are voices who feel that 2022 might not be as buoyant as this year and there are also concerns about the pandemic situation. A lot will depend on market sentiments next year as the uncertainty due to the new COVID variant still looms large on the markets and economy, Piyush Nagda, Head-Investment Product at Prabhudas Lilladher, said.
Ricky Kirpalani, Lead Sponsor at First Water Capital Fund (AIF), said that 2022 may not be as buoyant as 2021 for IPO markets, given how some recent large public issue like Paytm have performed post-listing. This year, as many as 63 companies have floated their IPOs to raise Rs 1.2 lakh crore, an analysis of data with the exchanges showed.
This was way higher than Rs 26,611 crore raised by 15 companies through initial share sales in the entire 2020 and nearly double the previous best of Rs 68,827 crore by 36 companies in 2017. Apart from the 63 firms, PowerGrid InvIT (Infrastructure Investment Trust) mopped up Rs 7,735 crore through its IPO while Brookfield India Real Estate Trust raised Rs 3,800 crore through REIT (Real Estate Investment Trust).
Companies took advantage of the bullish trends in the stock market as well as excessive liquidity in the system. Also, IPOs of new age technology companies, robust retail participation, and huge listing gains added to the glitter on the Dalal Street amid the broader economy slowly on the recovery path. "The rally in global equity markets, low interest rates and abundant liquidity due to the easy monetary policies of global central banks has aided in impressive fund raising through the IPO," Sameer Kaul, MD and CEO of TrustPlutus Wealth (India), said.
Samir Sheth, Partner and Head of Deal Advisory Services at BDO India, said a bunch of new age digital companies got listed in 2021 providing not only an opportunity for retail investors to invest but also an opportunity for some of the early-stage investors to make an exit. For instance, food delivery company Zomato's IPO was subscribed by over 38 times. Many other technology-led businesses, including One97 Communications (Paytm), FSN E-Commerce Ventures (Nykaa) and PB Fintech (Policybazaar) took the IPO route of raising funds.
Prateek Singh, Founder and CEO of LearnApp.com, said tech companies now want to expand globally for which they require capital and that capital is being raised through the IPO route. The largest IPOs were the One97 Communications that had an issue size of Rs 18,300 crore, followed by Zomato at over Rs 9,300 crore. The average issue size was a high Rs 1,884 crore this year.
IPOs of more than a dozen companies, including Data Patterns (India) Ltd, Tega Industries, Go Fashion (India) Ltd Latent View Analytics, MTAR Technologies, Devyani International, Rolex Rings, Tatva Chintan Pharma Chem and Nazara Technologies, got subscribed over 100 times. The year witnessed spectacular response from retail investors and the average number of applications from retail was 14.36 lakh, in comparison to 12.77 lakh in 2020 and 4.05 lakh in 2019.
2021 also saw majority of the IPOs opening with a premium over the issue price suggesting strong investors appetite. Paras Defense and Space Technologies, Clean Science and Technology, Macrotech Developers, Laxmi Organic Industries, MTAR Technologies, Easy Trip Planners, which got listed in this year, are trading above their issue price, giving smart returns in the range of 156 to 292 per cent, since listing.
"Due to the vibrancy in both the private and public markets, there is an increased play of investing on the private side and exiting on the public side as can be seen with a bevy of PE-backed IPOs in recent times (over 70 per cent of IPOs this year have been PE backed)," Satyen Shah, MD & Head of Investment Banking at Edelweiss Financial Services, said. Going into 2022, Eklavya, founder of trading platform Recur Club, said that as long as central bankers maintain an accommodative stance, public equity markets valuation will remain firm which will provide confidence to the IPO market.