India’s Growing IPO Landscape in 2024
In September 2024, India experienced a significant surge in initial public offering (IPO) activity, with 41 companies submitting their offer documents to the Securities and Exchange Board of India (SEBI). This uptick in IPOs indicates a revival of investor confidence and appetite for new market listings, with 67 companies currently awaiting clearance after filing their Draft Red Herring Prospectus (DRHP). Notably, one additional company is presently in the pre-filing stage.
Key IPO Metrics and Market Performance
According to a comprehensive report by Axis Capital, 239 IPOs have been listed in 2024, with 175 of those debuting above their issue price, while 10 opened at their issue price. Interestingly, 33 companies listed below their issue price initially managed to recover and close above it by September 30, 2024. As it stands, 183 IPOs continue to trade above their issue price, highlighting the bullish sentiment that prevails in the Indian market.
Retail Investor Participation
In the fiscal year 2024, 40 IPOs were successfully listed, and an impressive 35 of them are trading above their issue price, signifying strong demand and investor confidence in these new market offerings. Retail investors have notably benefitted from this wave of IPOs, enjoying substantial returns. The average listing gain for retail participants was 27%, and by September 30, 2024, these figures jumped to 114%. This remarkable growth accentuates the lucrative opportunities created by IPO participation.
Investor Behavior Analysis
Analysis of 236 IPOs indicated that the majority of retail investors exhibited a tendency to sell stocks that showed positive listing gains while holding onto shares with negative returns. Specifically, when IPO returns surpassed 20%, investors sold 67.6% of those shares within the first week. Conversely, a mere 23.3% of shares were sold for IPOs with negative returns, demonstrating strategic selling behavior based on performance.
Impact of SEBI Policy Interventions
Significant policy interventions by SEBI in April 2022 have reshaped the IPO landscape. Changes regarding the non-institutional investor (NII) allocation process and guidelines on IPO financing by non-banking financial companies (NBFCs) have led to a notable decline in oversubscription rates from 38 to 17 times. These interventions have also resulted in a dramatic drop in applications from “big-ticket” NII investors, decreasing from an average of 626 applications per IPO to a mere 20.
Recent Approvals by SEBI
As of September 30, a total of five major companies have received SEBI approval to raise funds through IPOs. Among these are significant players such as Vishal Mega Mart, ACME Solar Holdings, Mamata Machinery, Hyundai Motor India, and Swiggy Ltd. The forthcoming IPOs of these well-known companies are expected to attract considerable attention and further bolster the market’s growth.
Conclusion
The vibrant IPO activity seen throughout 2024 underscores the resilience and optimistic outlook of the Indian financial market. With increasing participation from retail investors and promising government policies in place, the IPO landscape appears set for continued growth. For stakeholders and potential participants, these developments signal a crucial moment to engage with the market and capitalize on the emerging opportunities.
