After shares were listed on stock exchanges in 2023, investors who participated in initial public offerings (IPOs) saw a significant increase in their investments. Although these companies only raised Rs 49,434 crore from the market through the IPOs, the market value of the 57 IPOs listed in the last 12 months has skyrocketed to Rs 479,656 crore, translating to an 870 per cent spurt in investor wealth.

IPO Boom

This indicates that the total value of the gains made by investors—primarily promoters and institutional investors—from these IPOs is Rs 430,000 crore. Five 57 companies listed on stock exchanges in the previous 12 months have discounted share prices. Some have made gains of up to 236%.

PRIME Database Group Managing Director Pranav Haldea reports that total public equity fundraising rose from Rs 90,886 crore in 2022 to Rs 1,44,283 crore in 2023, a 59% increase. Nine of the 57 IPOs were oversubscribed more than three times, and 41 of the IPOs received a mega response more than ten times (of which 16 were subscribed more than fifty times). He said there were one to three times as many bidders for the remaining seven IPOs.

Equity fund inflows increased by 9.40% in December, while mutual fund assets surpassed Rs 50 lakh crore.

After raising Rs 3,042 crore through the IPO, Tata Technologies has a market capitalization of Rs 47,378 crore. On January 12, the company’s share price was Rs 1,167.90, compared to the IPO price of Rs 500. Compared to the IPO size of Rs 2,150 crore, the market capitalization of the Indian Renewable Energy Development Agency is Rs 29,834 crore. On January 12, the share price was Rs 111, compared to the IPO price of Rs 32. Investor wealth in Mankind Pharma is currently Rs 88,970 crore, compared to the IPO size of Rs 4,326 crore at the Rs 1,080 IPO price. The price of its shares surged to Rs 2,221.

While promoters and institutional investors hold the lion’s share of this gain through the listing, retail investors who have stayed invested have witnessed significant value appreciation. A retail investor purchased 10 Tata Tech shares for Rs 5,000 during the initial public offering (IPO). Now that the market value of those shares has increased to Rs 11,679, he is sitting on a gain of more than Rs 6,000.

Most IPOs have seen massive oversubscriptions as a result of the strong returns. Recalling the previous experience, issuers refrained from overpricing. “The last few months’ IPO craze hasn’t waned. Business enthusiasts are taking notice of the big names that are entering the market, according to Mahavir Lunawat, Managing Director of Pantomath Capital Advisors. According to him, initial public offerings (IPOs) have recently evolved beyond simple financial transactions, drawing interest from a wide range of investors rather than just experienced equity buyers. In 2023, the IPO market was thriving due to the secondary market’s positive trend. 57 IPOs came to the market for subscription to raise funds worth Rs 49,434 crore against 40 IPOs last year (total issue size of Rs 64,000 crore).

Going ahead, the pipeline remains intense, with a sharp increase expected in new-age tech IPOs, including Ola Electric, Swiggy and Mobikwik.

Moreover, the manufacturing and investment sectors saw strong growth in the first half of FY24, accounting for 7.7% of GDP growth. The Reserve Bank of India updated its GDP prediction for FY24, raising it to 7%. The market has benefited from these overly optimistic expectations for real GDP growth. Significant growth was observed in other high-frequency data points such as power demand, automobile sales, GST collections, and PMI data. However, according to a Motilal Oswal report, the first half of FY24 corporate earnings concluded positively, with Nifty companies generating 30% YoY profit growth.

The US and Indian elections this year may cause a brief lull in fundraising activity, according to Ramesh of Kotak Investment Banking. Still, the momentum behind the IPO is unlikely to slow down. The average IPO size is predicted to return to Rs 1,500 crore this year after reaching an average deal size of Rs 750–800 crore in 2023, the year of mid-cap IPOs.

This year, a wide range of businesses are anticipated to enter the market, including more extensive financial and tech services, manufacturers, and infrastructure firms planning to go public. In the upcoming 12 to 24 months, new-age tech listings will also take place, according to Ramesh.