14 IPOs in FY20 returned an average of 22.5% on listing day

The initial public offering (IPO) in FY20 performed better on listing day as compared to the ones in FY19 as the 14 companies that went public in FY20 returned an average of 22.5 percent. Excluding one IPO that returned 127.7 percent on listing day, the average of the remaining 13 IPOs was 14.4 percent.

According to a KPMG report, the listing day performance of the 14 IPOs in FY20 was better than FY18 with an average of 20.7 percent generated by 41 listings. The performance was comparatively lackluster in FY19 as the 18 companies listed during the year returned a meagre 2 percent on listing day.

“The significant gap in performance is explained by the fact that 10 out of 18 IPOs witnessed negative listing in FY19 as against 4 out of 14 in FY20,” the research report said.

Further, 6 IPOs were listed at a premium of more than 20 percent in FY20 compared to 2 IPOs in FY19. The average listing day gains of the 10 IPOs that witnessed positive listings in FY20 was 33.8 percent compared to 15.8 percent of the 8 positive listings in FY19 and 31.6 percent of the 29 positive listings in FY18.

Source: KPMG report

Of the 10 companies across FY19 and FY20 that witnessed double-digit listing gains, 3 belonged to the Financial Services sector with 2 each from the Technology, Media and Telecommunication (TMT) and Hospitality sectors, the report noted.

Of the 14 negative listings across FY19 and FY20, 5 belonged to the Financial Services sector while 3 were from the Construction and Material sector.

Also, 32 IPOs cumulatively raised Rs 40,700 crore in FY19 and FY20 witnessing total subscription of Rs 895,100 crore, thereby recording a subscription to funds raised ratio of 24.9 times.

The average issue expenses of IPOs across issue sizes in FY19 and FY20 remained stable in the range of 4.9-5.3 percent.

The research finds that as the issue size increases, the costs of the issue gradually decrease.

While the smaller issues (less than Rs 500 crore) continued to cost more than the average, the larger issues (more than Rs 1,500 crore) were less expensive.

The only exception was in FY19 where issues between Rs 500-1,000 crore cost more than issues in the range of Rs 1,000-1,500 crore.

The average issue expenses of 9 PE-backed were 4.5 percent compared to 5.2 percent of the 23 non-PE backed companies. The 7 PSUs spent an average of 4.7 percent on their IPOs.