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Sah Polymers will likely to be the last initial public offering (IPO) of 2022. The public issue is set to open on Friday, December 30. The year 2022 is ending on a sombre note for IPO investors.
Three companies that completed their fundraising in the first half of December have dropped below their issue price on the first trading day. The companies--Abans Holdings, Sula Vineyards, Landmark Cars--saw muted response from investors, receiving bids in the range of 1-3 times the shares offered. IPOs of KFin Technologies and Elin Electronics are set to list this week.
Gauging poor market conditions, companies have curtailed fundraising activity in 2022. The total money raised through IPOs in 2022 is way below the previous year’s levels, as this Moneycontrol report explains. About Rs 61,000 crore is estimated to be raised through IPOs this year, lower than Rs 1.2 lakh crore companies raised in 2021.
Even so, IPO investors may have lesser reasons to complain this year versus 2021. As of December 18, only 32 percent of the companies that have raised funds this year are trading at a discount to the issue price. Comparatively about 40 percent of the companies that have raised funds through IPOs in 2021 are trading below their issue prices, shows an analysis by Bank of Baroda Research.
The reasons are not hard to explain. The year 2021 saw public issues from new age companies such as One 97 Communications (Paytm), PB Fintech, Zomato whose stocks dropped sharply in market sell-off. Several e-commerce and fintech companies are in scale-up stage and are losing money.
This year also has its share of disappointments with shares of companies such as Life Insurance Corporation of India (LIC) and Delhivery falling way below their IPO rates. Barring LIC and Delhivery, most large IPOs with issue size of more than Rs 1,000 crore are yielding positive returns for IPO investors this year, points out Bank of Baroda Research.
That said investors should read the above-mentioned trends in conjunction with unfavourable market conditions. Fewer companies have raised funds through IPOs this year vis-à-vis 2021. This has skewed the overall issuances in 2022 towards large IPOs from insurance (LIC), edible oil (Patanjali Foods, Adani Wilmar) and healthcare service sectors.
Still, the IPO pipeline remains healthy. An estimated 50-55 companies have received regulatory clearances for their IPOs. These companies are from broad range of sector and should provide better choice for IPO investors in the year 2023. Investors will be hoping for a better showing in 2023 once the macro clouds part, and a combination of sensible pricing and quality of issues could help realise that hope.
Investing insights from our research team
Happiest Minds – Why a steeper correction is possible
Pharma: Is the pandemic investment template about to play out?
What else are we reading?
Take steps to prevent a new COVID surge, but don't lock down again
The Eastern Window | The global economy eyes China warily, as COVID’s spread poses potent threat
India’s electric vehicles’ sector is ripe for a Musk-like disruptor
GuruSpeak | This trader graduated from working in exchanges to trading on them
Investors rush out of equity funds to end rough year (republished from the FT)
Where are the women in India’s startup ecosystem?
States’ financial position needs to be watched as much as the Centre’s
Technical Picks: Cipla, Latent View, USD-INR and Bajaj Finance (These are published every trading day before markets open and can be read on the app).
R Sree Ram Moneycontrol Pro