India is leading the IPO wave, as the economy and investor confidence grow. By the end of the year, India is expected to have 175+ IPOs, making the country the best in the world for new offerings in 2023. According to the latest EY India IPO Trends report,  in the third quarter alone, 21 new listings came on India’s main market, raising $1.77 billion, a 425% increase from the same period last year. The report also revealed that India ranked fourth globally in terms of the number of IPOs and ninth in terms of proceeds in Q3 2023.

What is Initial Public Offering

An IPO, or initial public offering, is when a private company sells its shares to the public for the first time. IPOs are a way for companies to raise funds, expand their business, increase their visibility, and reward their early investors. IPOs also offer an opportunity for investors to buy shares of a company at a fixed price before they start trading on the stock market.

The year 2023 is expected to witness a flurry of IPOs in India, as many companies are gearing up to tap the capital Market and benefit from the post-pandemic economic recovery. However, not all IPOs are created equal, and some may offer better returns than others.

Both new and seasoned investors eagerly look out for IPOs to make their bids and hope to get a share of an emerging and promising business. IPOs can also provide diversification, growth potential, and liquidity to your portfolio.

But how do you find and evaluate the best IPOs in the market? And what are the trends and prospects of the IPO market in India and globally? In this article, we will explore all this and help you catch the wave of new listings.

2023 sees an IPO bonanza, as markets recover from the pandemic

The IPO market saw a downturn in the pandemic year 2020, with a 14.9% fall in listings globally. But the recovery in 2021 made it the ‘Year of IPOs’. The number of mainboard IPOs in 2021 exceeded those of small and medium enterprises (SMEs), as larger companies rode positive market sentiment, and a 24.12% rise in the Nifty 50.

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After a bull run in 2021, 2022 brought volatility, fueled by high inflation, rising interest rates, and geopolitical tensions. As a result, many companies scrapped their IPO plans citing unfavorable market conditions.

But in 2023, the total number of IPO listings has risen sharply, and reached the highest level in the past five years. According to data from Prime Database, as of November 20, 2023, there have been 143 IPOs in India, raising a total of $11.8 billion. This is a 425% surge from the same period last year, when only 27 IPOs raised $2.2 billion.

The renewed enthusiasm is visible globally as well. The US indices S&P 500 and Nasdaq 100 have risen by 18.4% and 46.5% in 2023, respectively. The global IPO market has raised $268.8 billion in the first nine months of 2023, surpassing the previous record of $262.7 billion in 2007.

India is set to be the fastest-growing major economy in FY24, with a projected growth rate of 8.5%, according to the International Monetary Fund (IMF). During Q3 2023, over twenty-five companies have filed their Draft Red Herring Prospectuses (DRHPs), indicating a strong commitment to raise funds in the coming quarters. The market remains favorable to companies showcasing resilient, scalable, and well-managed business models.

These factors have boosted the confidence of both domestic and foreign investors, who are looking for new avenues to invest their capital. The IPO market has also benefited from the participation of retail investors, who have shown a strong appetite for new listings.

Vast majority of IPOs list in the green

Over the past five years, the number of IPOs listing with gains has increased. As of November 20, 2023, 83% of IPOs have listed above their issue prices, according to Prime Database. This indicates that the IPO market is in a bullish phase, and investors are willing to pay a premium for new shares.

However, not all IPOs are winners in the long run. Some IPOs may be overpriced, overhyped, or face competition from other players in the market. Therefore, it is important to do your homework before investing in an IPO, and not get carried away by the hype.

Some of the factors that you should consider before investing in an IPO are :- 

• The company’s business model, financial performance, growth prospects, and competitive edge

• The quality of the management team, promoters, and underwriters

• The valuation of the company, and the pricing of the IPO

• The demand and supply of the shares, and the market sentiment

• The risks and challenges that the company may face in the future

The EY report of IPO trends 2023, also projected a robust outlook for the IPO market in the coming quarters, as several companies across various sectors are preparing to go public. Some of the anticipated IPOs in the pipeline are:

• Motisons Jewellers Limited, a jewelry retailer, plans to raise $500 million in December 2023.

  
  

• Ebixcash, a digital payments platform, plans to raise $400 million in January 2024.

  
  

• Innova Captab, a pharmaceutical company, plans to raise $300 million in February 2024.

  
  

• Indiafirst Life, a life insurance company, plans to raise $200 million in March 2024.

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The year 2023 is expected to witness more IPO activity, as many companies across various sectors are gearing up to go public.

Some of the upcoming IPOs in India in 2023 are :- 

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Inox India

A leading cryogenic equipment manufacturer that plans to raise up to Rs 1,200 crore through a pure offer-for-sale of up to 22.11 million shares by its existing shareholders and promoters. The company is a part of the Inox Group, which also operates in the sectors of industrial gases, renewable energy, and entertainment. The company has a market share of over 70% in the domestic cryogenic equipment market and exports its products to over 100 countries. The company intends to use the proceeds from the IPO for general corporate purposes and to enhance its brand visibility.

DOMS Industries 

A stationery and art product company that intends to raise Rs 1,200 crore through a fresh issue of Rs 350 crore and an offer-for-sale of Rs 850 crore by its promoter and selling shareholder. The company is one of the leading players in the stationery and art product industry in India, with a portfolio of over 500 products under the brand name DOMS. The company has a strong distribution network of over 2,000 distributors and 4 lakh retailers across India. The company plans to use the net proceeds from the fresh issue for repayment of debt, working capital requirements, and general corporate purposes.

Happy Forgings

An auto components maker that aims to raise Rs 1,300 crore through a fresh issue of Rs 500 crore and an offer-for-sale of up to 80.55 lakh shares by its promoter and investor. The company is a leading manufacturer of forged and machined components for the automotive and non-automotive sectors, such as tractors, railways, defense, aerospace, etc. The company has a diversified customer base of over 200 domestic and international clients, including Maruti Suzuki, Tata Motors, Mahindra & Mahindra, etc. The company intends to use the net proceeds from the fresh issue for capacity expansion, debt reduction, and general corporate purposes.

Jana Small Finance Bank

A small finance bank that focuses on lending to MSMEs, agriculturists, individuals and affordable housing, that seeks to raise Rs 575 crore through a fresh issue and an offer-for-sale of up to 4.05 million shares by its promoter and existing shareholders. The bank was established in 2018 after converting from a microfinance institution. The bank has a network of 607 branches and 140 asset centers across 20 states and union territories in India. The bank aims to use the net proceeds from the fresh issue for augmenting its tier-I capital base to meet its future capital requirements.

Medi Assist Healthcare Services

A health benefits administrator that offers solutions for cryogenic conditions, proposes to raise funds through an offer-for-sale of up to 2.8 crore shares by its promoter and existing shareholders . The company is a leading player in the health insurance sector, providing services such as claims processing, network management, wellness programs, etc. The company has a network of over 11,000 hospitals and 4,000 diagnostic centers across India . The company does not intend to receive any proceeds from the offer-for-sale and the selling shareholders will be entitled to the proceeds .

Allied Blenders and Distillers

An Indian-made foreign liquor company that produces brands such as Officer's Choice Whisky and Sterling Reserve, plans to raise Rs 2,000 crore through a fresh issue of Rs 1,000 crore and an offer-for-sale of Rs 1,000 crore by its promoter and existing shareholders . The company is the second-largest spirits company in India by volume, with a market share of over 12% in the IMFL segment . The company intends to use the net proceeds from the fresh issue for repayment of debt, working capital requirements, and general corporate purposes.

India Shelter Finance

An affordable housing finance company that caters to the underbanked customers across India, that intends to raise Rs 1,800 crore through a fresh issue of Rs 1,000 crore and an offer-for-sale of Rs 800 crore by its promoter and existing shareholders . The company is a non-banking financial company that provides home loans, home improvement loans, and loan against property to the low and middle-income segments, especially in the semi-urban and rural areas. The company plans to use the net proceeds from the fresh issue for augmenting its capital base, meeting its future growth requirements, and general corporate purposes.

Western Carriers (India)

A multi-modal, rail-focused, 4PL asset-light logistics company that offers customized and integrated logistics solutions, that aims to raise Rs 500 crore through a fresh issue and an offer-for-sale of Rs 93.29 lakh by its promoter. The company is one of the leading logistics service providers in India, with a presence in segments such as bulk cargo, containerised cargo, project cargo, etc. The company has a network of over 200 offices and 300 warehouses across India . The company intends to use the net proceeds from the fresh issue for repayment of debt, working capital requirements, and general corporate purposes.

Conclusion

The IPO landscape is witnessing a surge in activity driven by both an urge to tap the capital markets pre-or-post Indian general elections and strong economic activity, positive domestic and foreign investor sentiment towards India. This momentum is expected to continue well into H2 2024.

The IPO market offers a unique opportunity for investors to get a  piece of the action, and benefit from the growth potential of new and emerging businesses. However, investing in IPOs also involves risks and uncertainties, and requires careful analysis and due diligence.

Therefore, before you jump on the IPO bandwagon, make sure you do your research, understand the company and its prospects, and invest according to your risk appetite and financial goals.