Is The IPO Frenzy Back?

Is the IPO frenzy back??

After a slow start to the year, IPO activity has picked up in recent months. As of 31st August 2023, sixteen companies had raised money via mainboard IPO in the current financial year.??

Has the IPO market peaked or is there more to come??

If we look at the IPOs in the last 3 years and compare it to the mainboard IPOs in the first two quarters of this fiscal year, the frequency of IPOs in this quarter seems to be heading upwards but there is still some way to go. In Q2 FY23, till now we have seen 10 mainboard IPOs. In comparison, 23 companies in Q2 FY22 had raised capital using Initial Public Offerings.?

However, if we look at the capital raised in these two quarters, that tells us a much different story. The capital raised by these 16 companies together is at the lower end of the spectrum as compared to the previous 3 years. With the exception of Mankind Pharma, larger unlisted companies are still shying away from the primary equities market.?

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However, institutional interest in IPOs seems to be returning as the QIB application amount increased in the second quarter even though the capital raised decreased. This could be partly attributed to a significantly higher number of IPOs in this quarter as opposed to Q1.?

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What to expect in the coming months??

Empirical data suggests that activities in the primary equity market pick up whenever the market is in a bull run or near its peak. Naturally, companies that would have an IPO in their pipeline would look to come at a time when valuations are higher.??

While Nifty Midcap trades at an all-time high, capital raised via IPOs is still a fraction of what we’ve seen in the past 3 years. An a priori reasoning suggests a further uptick in IPOs in the coming months.?

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