Shaping Tomorrow: A Deep Dive into How 2023 IPOs Reshaped the Stock Landscape

The popularity of investing in India's primary markets, notably through IPOs, has grown significantly in the past five years, with the market witnessing substantial expansion, nearly doubling the number of issues. 

Impressive Growth Trajectory of 2023

As the year 2023 concludes, the Indian Stock Market has witnessed approximately 230 IPOs over the course of 246 trading days.It is been observed that there is a noteworthy surge in the cumulative issue size, escalating from Rs 16,754 crore in 2018 to an impressive Rs 1,38,894 crore in 2021-22. This surge not only indicates a rising demand for equities but also underscores investors' steadfast confidence in the Indian financial market.

These statistics depict a compelling narrative of the thriving appetite for IPOs, showcasing the resilience and enthusiasm of investors navigating the dynamic primary market landscape. Amid expectations of market volatility in 2023, the year has emerged as the focal point for initial public offerings, witnessing 180 SMEs and 58 mainboard listings. 

Ranking the Top 10 IPO Success Stories of 2023 (Ranked by Subscription)

Top 10 Indian IPOs (Ranked by Listing Gains)

Top 10 Subscription-Ranked SME IPOs of 2023

Key Contributors to The Unprecedented Rise In 2023

The surge in this year's unprecedented IPO numbers can be attributed to several factors

• Strong performance of Indian companies.

• Exceptional outlook for companies, particularly in manufacturing.

• Substantial liquidity among Indian institutional investors from SIP and other inflows

• The presence of foreign portfolio investment (FPI) capital amid global events

• A mutual agreement on valuation that satisfies both issuers and investors, contributing to this noteworthy trend.

• The majority of IPOs in 2023 adopted the Offer-for-Sale approach, aiming to allure long-term investors and simultaneously capitalize on a fraction of the promoters' investments.

• Increase in SME IPOs.

• India’s target to become a $5 trillion economy by 2027 has boosted retail investors' confidence.

IPO Insights 2023: Key Drivers and Market Dynamics that Shaped India's Financial Landscape

• Indian Economic Growth

India's robust economic growth, estimated at 6.5% to 6.6%, surpasses the global average of 3%. Thus , whenever the Indian economy is performing better than the global average , there would be sufficient liquidity in domestic market, thus attracting investors towards IPO.

Currently, only 3% of India's population invests, but rising disposable incomes are expected to bring substantial capital into equities, fueling market growth and offering extensive opportunities. Investors in this growth story can benefit long-term by adopting a diversified portfolio strategy across large cap, midcap, smallcap, and SME equities. Recent highlights include LIC, India's largest life insurer, setting a record as the largest-ever IPO with 73.38 lakh applications. This was surpassed by Tata Technologies, a Tata Group company, launching its IPO with a massive 73.58 lakh applications and listing with an impressive 140% gain.

• Domestic Market Sentiments

The prosperity of IPOs in 2023 is closely linked to the prevailing market sentiments and the strong bullish market. The primary factor contributing to this exceptional performance is attributed to a robust macroeconomic outlook combined with a significant inflow of domestic liquidity.

The favorable market conditions across industries like health care, Insurance, IT, Pharmaceuticals in the recent years , have contributed to IPOs .

Presently, merely 3% of India's population engages in market investments. However, the expected increase in disposable incomes foretells a significant surge of capital into equity markets. This surge is poised to propel the expansion of the Indian equity market, unlocking abundant opportunities for both businesses and investors.

Recent highlights include LIC, India's largest life insurer, setting a record as the largest-ever IPO with 73.38 lakh applications. This was surpassed by Tata Technologies, a Tata Group company, launching its IPO with a massive 73.58 lakh applications and listing with an impressive 140% gain.

In the future, as India is expected to exceed $4,000 per capita income by 2030, there is vast growth potential for listed companies, encompassing both large and small enterprises. This expansion will be propelled by an upswing in consumer spending, driven by increasing purchasing power and the ongoing digitization of the economy.

• SME Segment Dynamics

The SME segment in India is dynamically evolving, exemplified by the listing of 173 SMEs through IPOs, facilitated by less stringent eligibility criteria.The Rs25 crore average ticket size for SME IPOs in 2023 suggests that promoters are aiming for increased capital to support their growth aspirations, and investors are expressing favorable responses to these opportunities.

• Regulatory Landscape

SEBI's strategic decision to truncate IPO listing timelines from T+6 to T+3 days is a significant move aimed at optimizing the IPO process, enhancing its appeal to both issuers and investors. This acceleration in the listing process allows issuers to expedite access to capital, fortify market sentiment, mitigate pricing risks, and streamline administrative operations. For investors, it translates to early share access, reduced holding period risk, improved liquidity, and instill confidence in the market's efficiency.

In the past few years, SEBI has implemented various measures in the primary market, including extending lock-in periods for anchor investors and subdividing the NII tranche based on different ticket sizes. These initiatives are designed to improve transparency and prevent abrupt fluctuations in market prices.

• Investor Behaviour and Confidence

Increasing confidence in the Indian Stock Market, as reflected in IPO bookings being oversubscribed, signifies an improved risk appetite among retail investors.

There has been a significant transformation in the IPO landscape in recent years, marked by a notable shift in the types of companies entering the public domain. The primary markets have been predominantly shaped by tech-focused IPOs, exemplified by the listings of companies like Zomato, PolicyBazaar, Paytm, Nykaa, Nazara, Delhivery, Honasa, and others. This trend underscores the increasing acceptance of new-age sectors in the Indian markets and demonstrates investors' readiness to embrace innovation.

• Make In India Initiatives

Notably, in 2023, a substantial number of manufacturing companies have entered the capital market, aligning with the Make In India initiatives.

IPO Optimism 2024: 

Foreseeing a continued surge in IPOs in 2024, potentially surpassing 2023, optimism is fuelled by expectations of GDP growth, the Indian manufacturing narrative, and confidence in the ruling party's return to power based on recent state election results.

The trajectory of India's IPO market indicates sustained expansion, propelled by a blend of factors such as a robust economy, investor trust, favorable regulatory conditions, and the ascendancy of technology-centric enterprises. As India's financial landscape matures and its economy flourishes, the IPO market will assume a progressively vital role in stimulating the country's growth and generating wealth for investors.

While a temporary market pause is expected leading up to the general elections, marked by potential volatility and cautious investor behaviour, experts remain positive about the primary market's sustained momentum. Notable debuts and resilient subscriptions have characterized the market, contributing to an overall optimistic outlook for 2024 despite anticipated fluctuations.

Closing Notes

Despite the traditional lull in primary markets six months before a general election, ongoing robust IPO activity defies expectations. The ruling party's strong performance in recent state assembly elections and the dovish stance of the US Fed have alleviated concerns about political and market stability.

Frequently Asked Questions

How can I participate in upcoming IPOs?

To engage in upcoming IPOs, register with Enrich Money, acquire a free Demat account, stay informed about new IPOs, analyze the company's financials, and submit your IPO application online.

What does IPO oversubscription mean? What does oversubscription signify? How can one participate in an IPO?

IPO oversubscription occurs when the demand for shares exceeds the available supply. It indicates high investor interest and confidence. To invest in an IPO, follow the company's offering, open a Demat account, and apply through the Enrich Money platform. 

Why is 2023 considered a focal point for initial public offerings?

2023 emerged as a focal point for IPOs, witnessing 180 SMEs and 58 mainboard listings, despite expectations of market volatility.

How many IPOs were observed in the Indian Stock Market in 2023?

In 2023, the Indian Stock Market witnessed approximately 230 IPOs over 246 trading days, marking a notable increase in the number of issues.

How does the robust IPO activity defy expectations amid the traditional lull before a general election?

Despite the traditional lull, ongoing robust IPO activity is observed, with the ruling party's strong performance in recent state assembly elections and the dovish stance of the US Fed alleviating concerns about political and market stability.

 

Disclaimer: This blog is dedicated exclusively for educational purposes. Please note that the securities and investments mentioned here are provided for informative purposes only and should not be construed as recommendations. Kindly ensure thorough research prior to making any investment decisions. Participation in the securities market carries inherent risks, and it's important to carefully review all associated documents before committing to investments. Please be aware that the attainment of investment objectives is not guaranteed. It's important to note that the past performance of securities and instruments does not reliably predict future performance.