Lower income, inflation kill apettite for IPOs

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So far, initial public offerings  have seen a lacklustre market in India in 2023. Only four IPOs took flight between January-March 2023. To add to this, fundraising via such public issues have dropped by 89% Y-o-Y basis.

During the first four months of 2023, Indian IPOs managed to rake in $294 million. But during the same time last year, Indian companies had gathered a staggering $1.5 billion.

India behind the average While the slowdown is in line with global trends, which registered a 36% decline in raising money via IPOs, India lags far behind even from the global average. However, reports suggest that IPOs are expected to pick up momentum in the second half of 2023.

On one hand, many companies like One Mobikwik, Tata Technologies, Ixigo, Bajaj Energy are gearing up for fundraising this year. But many companies like Joyalukkas, Utkarsh Small Finance Bank, Droom, Go Airlines, Ixigo, FabIndia and Pharmeasy backtracked on their plans, citing weak market conditions.

Lower consumption appetite, rising inflation have eaten away at the common man’s enthusiasm for the stock market. In such times, people usually shy away from risky investments like equity.

Recently, market regulator SEBI proposed to trim the IPO timeline from 6 to 3 days from the closure of the issue. However, both investors and companies are market-weary, following the dismal performance of companies who debuted in the market last year.

Is the condition dismal everywhere?

Surprisingly, no. The small and medium enterprise (SME) sector is ticking with IPOs. More importantly, SME firms have managed to raise Rs 930 crores by way of 49 issues so far in 2023, which is 9x the money raised by 4-5 mainstream IPOs. Infact, 33 out of these 49 stocks are currently trading over their offer price. Last year, it had collectively raised over Rs 2,200 crores via 125 issues. Despite the extremely high risk inherent in investing in these nascent companies, investors are willing to bet on them.