2023 marks record year for IPOs, redefining India's financial landscape

In a landmark year for India's financial markets, 2023 has proven to be a historic year on the back of surge in Initial Public Offerings (IPOs), reshaping the country’s capital market landscape. The resounding success is evident with over 119 IPOs hitting the market, and 58 companies making their debut on the main board, setting a new benchmark for market activity.

Driving forces behind the IPO boom

The surge in IPO activity is not a mere coincidence but a result of a perfect storm of favourable factors. Robust macroeconomic indicators, a decline in crude oil prices, a positive global interest rate outlook, renewed foreign inflows and consistent investments from domestic mutual funds have collectively contributed to the buoyant atmosphere in the primary market.

The year began with caution, marked by a subdued sentiment in the initial months. However, as time progressed, the narrative underwent a significant transformation, culminating in a remarkable surge in IPO listings in recent months. A stark contrast with the preceding year is apparent, with 119 IPOs already listed in 2023, surpassing the 90 IPOs recorded in the entire year of 2022.

Vaibhav Kaushik, a research analyst at GCL Broking, sheds light on the current market dynamics. He points out the absorption of numerous IPOs and underscores the delicate balance between demand and supply.

Kaushik anticipates further expansion in the IPO market, citing the impact of SEBI's new requirements. Regulatory changes are expected to stimulate increased demand, potentially leading to shorter IPO listing dates and a shift towards T+0 settlement.

Successful IPOs

Several IPO success stories have captured the market's attention. Tata Technologies, the first company from the Tata Group to launch an initial share sale in almost two decades, stole the spotlight with an overwhelming subscription rate of 69.43 times and a debut premium exceeding 100 per cent. Honasa Consumer, initially met with tepid retail investor response, surprised the market by reporting a robust 9 per cent increase in net profit to Rs 29 crore in the second quarter of the fiscal year.

Mankind Pharma, a major player in the pharmaceutical sector, made a stellar debut, successfully raising Rs 4,326 crore through its IPO. These success stories underscore the dynamism and resilience of the Indian capital market.

Favourable market conditions, coupled with improving corporate earnings and robust economic growth, have prompted companies to choose the IPO route. Analysts highlight the bullish market sentiment, with recent listings like Tata Technologies and government-owned IREDA witnessing soaring debuts.

Companies have collectively raised over Rs 60,000 crore from public offerings, encompassing IPOs, follow-on offers, and offer-for-sales, according to data from Prime database.

As 2023 proves to be a watershed moment for IPOs, investors are eagerly anticipating further opportunities and potential gems among newly listed entities. The year concludes with a crowded IPO lane and investors becoming increasingly discerning in their choices, setting the stage for an exciting finale to a historic year in India's financial markets.

“Prevailing optimism in IPO market is driven by diminishing chances of a US recession, the Federal Reserve's pause in interest rate hikes, and hopes of rate cut,” said Palka Arora Chopra, director at Master Capital Services.

“Domestically, government initiatives aimed at easing business operations are attracting both domestic and foreign investors, creating positive sentiments towards India. The future of the IPO market in India looks promising, given the surge in activity and the positive market sentiment, both domestically and internationally,” Chopra added.

Private equity influence

Private equity firms are pivotal players in the surge behind IPOs as they use IPOs as a strategic way to exit to realise returns, analysts said.

The trajectory of the Indian IPO market is in good shape due to positive investor sentiment, high expected economic growth and supportive government policies for businesses, creating a conducive environment for growth, they added.

2023 stands as a pivotal year that has not only shattered expectations but has redefined India's financial landscape through a remarkable IPO surge. The stage is set for a promising future, with investors eyeing the market for continued opportunities, and the IPO lane remains a vibrant and dynamic space in India's economic narrative, analysts added.