India's IPO frenzy: September 2024 witnessed a remarkable surge in initial public offering (IPO) activity, with 41 companies filing their offer documents with the capital markets regulator Securities and Exchange Board of India (SEBI). Presently, 67 companies have filed their Draft Red Herring Prospectus (DRHP) papers with the market watchdog and await clearance. In addition, one company is at the confidential or pre-filing stage of its DRHP.
According to an Axis Capital report, out of the 239 IPOs listed during 2024, 175 opened above their issue price, 10 debuted at their issue price, and 33 listed below their issue price initially but later recovered to close above the issue price by September 30, 2024. As of this date, 183 IPOs continue to trade above their issue price, underscoring the bullish sentiment prevailing in the market.
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The significant uptick includes players such as NTPC Green, Hexaware Technologies, Vikram Solar, Aditya Infotech, Varindera Construction, Vikran Engineering, and Mauri Tech. These draft filings highlight the growing confidence of companies across sectors in tapping the capital markets, signalling strong investor appetite and a robust IPO pipeline.
In FY2024 alone, 40 IPOs were listed, and 35 are currently trading above their issue price. This demonstrates a strong performance trend, indicating sustained investor interest and confidence in new market offerings. Retail investors have significantly benefited from this IPO wave.
Out of the 236 IPOs analyzed, the average listing gain for retail investors stood at 27 per cent. By September 30, 2024, these gains had expanded to 114 per cent, reflecting the lucrative opportunities that retail investors have capitalized on through IPO participation. SEBI found that 50 per cent of the shares allotted to individual investors by value were sold within the first week of listing, and 70 per cent of the shares were sold within a year.
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Investors were more inclined to sell shares showing positive listing gains while holding onto those 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 just 23.3 per cent for IPOs that had negative returns.
SEBI's policy interventions in April 2022, particularly those concerning the non-institutional investor (NII) share allotment processes and the Reserve Bank of India (RBI)'s guidelines on IPO financing by non-banking financial companies (NBFCs), have had a significant impact.
According to the report, oversubscription rates in the NII category have halved, dropping from 38 to 17 times. Additionally, applications from "big ticket" NII investors, applying for more than Rs1 crore in IPOs, have seen a sharp decline, falling from an average of 626 per IPO before the policy changes to just 20 per IPO after the new rules were implemented.
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Five major companies received approvals from SEBI to raise funds via IPOs. According to SEBI's update on September 30, supermart major Vishal Mega Mart, renewable energy firm ACME Solar Holdings, packaging equipment manufacturer Mamata Machinery, auto major Hyundai Motor India, and food delivery giant Swiggy Ltd have received SEBI's approval to raise funds by floating their IPOs.
