September 2024 marked a notable increase in Initial Public Offerings (IPOs) in India, with 41 companies submitting their IPO documents to the Securities and Exchange Board of India (SEBI), according to a report from Axis Capital.
This surge features prominent firms such as NTPC Green, Hexaware Technologies, Vikram Solar, Aditya Infotech, Varindera Construction, Vikran Engineering, and Mauri Tech.
The increase in filings reflects a growing confidence among companies across various sectors in accessing capital markets, indicating a strong appetite from investors and a healthy IPO pipeline.
Currently, 67 companies are awaiting approval for their Draft Red Herring Prospectus (DRHP) submissions to SEBI, while one firm remains in the confidential pre-filing stage.
Of the 239 IPOs listed during this period, 175 opened above their issue price, 10 debuted at their issue price, and 33 initially listed below their issue price but later recovered to close above it by 30 September 2024. A total of 183 IPOs are trading above their issue price, highlighting a positive market sentiment.
In the financial year 2024 alone, 40 IPOs were listed, with 35 currently trading above their issue price, demonstrating a strong trend in performance and sustained investor interest in new market offerings.
Retail investors have notably benefited from this IPO boom. An analysis of 236 IPOs revealed an average listing gain of 27 per cent for retail investors, which has surged to 114 per cent by the end of September 2024.
This indicates substantial opportunities for retail participation in IPOs. SEBI found that 50 per cent of shares allotted to individual investors by value were sold within the first week of listing, and 70 per cent within a year.
Investors were more likely to sell shares that experienced positive listing gains, while they tended to hold onto those that listed at a loss.
Interestingly, when IPO returns exceeded 20 per cent, investors sold 67.6 per cent of shares by value within a week, compared to only 23.3 per cent for those with negative returns.
SEBI’s policy changes implemented in April 2022, particularly regarding Non-Institutional Investor (NII) share allotments and the Reserve Bank of India’s (RBI) guidelines on IPO financing by Non-Banking Financial Companies (NBFCs), have had a significant impact on the market.
Oversubscription rates in the NII category have decreased from 38 times to 17 times. Furthermore, applications from large NII investors, those applying for over Rs 1 crore in IPOs, have plummeted from an average of 626 per IPO to just 20 after the new rules were enacted.
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