Initial Public Offerings (IPOs) are making a strong comeback as Indian markets recover from their declines in early 2023. Despite a 4.5% drop in Nifty 50 during January and February, the benchmark index has rallied 10.3% in the year to date. Market sentiment is crucial for IPO success, which explains why companies like Mama Earth and Ola postponed their IPOs amid 2022's negative market sentiment. Now, they are considering a launch in 2023’s more favourable conditions.

Currently, of the 24 mainline IPOs released in 2023, only Radiant Cash Management is trading below its issue price. 

In this edition of the Chart of the Week, we look at the most successful and least successful IPOs in terms of listing gains/losses, and also their current gains from the issue price.

Most successful IPOs: ideaForge posts highest listing gain of 92.7% in 2023

Kicking off with the year's top performer in terms of listing gains, ideaForge Technology from the general industrials sector listed at a premium of 92.7% over its issue price and raised Rs 567 crore to fund its investments in product development. The company's diverse portfolio includes hardware (including Unmanned Aerial Vehicles, payloads, batteries, chargers, and communication systems) and software (such as Ground Control Station for control and autopilot sub-systems). The IPO was subscribed for 106x of the available shares.

Despite a stellar listing, its share price fell by 18% in the listing week in July. Apart from profit booking, the decline can be attributed to the company's dependency on government orders, its presence in a heavily regulated space, and reliance on imports. In addition, its net profit fell by 54.3% YoY, triggering a 6% drop in share price on August 9. However, the stock is still trading 51% above its issue price.

Banking and finance sector stocks dominate the IPO success stories 

Two of the top five successful IPOs are from the banking and finance sector –  Utkarsh Small Finance Bank (USFB) and SBFC Finance. Both these IPOs listed at a premium of 92% and 61.8% respectively. Their share prices have remained stable post-listing, with Utkarsh and SBFC trading at 93% and 55.4%, respectively, above their issue prices, which is close to their listing gains.

USFB, with an issue size of Rs 500 crore, focuses on microfinance services in unserved or underserved segments, particularly in Uttar Pradesh and Bihar. The IPO was subscribed for 101.9x of the available shares. According to IDBI Capital, USFB has a cost-to-income ratio of 54.1 in FY23, lower than its peers like Equitas SFB (63.4), Suryoday SFB (60) and Ujjivan SFB (54.8). A lower cost-to-income ratio indicates effective expense management relative to income.

SBFC Finance’s IPO, aimed at funding future business growth, raised Rs 1,025 crore through a combination of fresh issue and offer for sale. This non-banking finance company provides secured MSME loans and loans against gold. The IPO was subscribed for 70.2x of the available shares.

Moving on to the software & services sector, only Netweb Technologies makes it to the top five successful IPOs in 2023. This original equipment manufacturer (OEM), which specialises in high-end computing solutions, listed at an 82.7% premium and now trades at a 69.7% premium to its issue price. 

The company filed the IPO to raise Rs 631 crore through a combination of fresh issue and offer for sale. It was subscribed for 90.4x of the available shares. This IT company achieved a revenue CAGR of 75% over FY21-23, along with profit growth of around 138% during the same period.

Lastly, Cyient DLM, an Integrated Electronics Manufacturing Solutions (EMS) provider from the margin-sensitive commercial services and supplies sector, listed at a premium of 58.7% over its issue price and continued to rise after listing. It currently trades 173% higher than its issue price. The IPO was subscribed for 67.3x of the available shares. In Q1FY24, the company secured orders worth $33.6 million (approximately Rs 270.9 crore), contributing to backlog growth and stability. 

From the successful IPOs, now we move on to the ones that failed to perform well in their listing. 

Least successful IPOs: Construction sector stumbles amid OPEC production cuts

Udayshivakumar Infra, a cement and construction company, saw its IPO open at a 10% discount to its issue price. However, the stock has risen since its listing and currently trades 18% above its issue price. According to analysts, the lackluster listing was due to a subdued market sentiment on the back of the unexpected announcement of OPEC+ crude oil production cuts in April The IPO was subscribed for 32.5x of the available shares.

Following closely in the listing losers list, Avalon Technologies from the general industrials sector listed 8.7% below its issue price. However, the stock has since recovered, now trading 38.6% above it. Avalon Technologies is a fully integrated electronic manufacturing services (EMS) provider in India, offering solutions including box build and PCB services. The IPO was subscribed for 2.2x of the available shares.

Food and transportation stocks rise post tepid debut

From the food, beverage and tobacco sector, HMA Agro Industries’ IPO listed at a marginal 0.1% premium to its issue price but is currently trading 36% above it. HMA Agro is involved in the export of buffalo meat to around 40 countries. The company raised Rs 480 crore, of which Rs 150 crore was fresh issue, with Rs 135 crore earmarked for working capital needs and less than 25% of the gross proceeds allocated for general corporate purposes. 

The IPO got a relatively modest subscription rate of 1.6x due to the high valuation of HMA Agro Industries, which had a PE of 49, higher than the sector’s PE of 41.

Moving on to the transportation sector, TVS Supply Chain Solutions posted a listing gain of 2% and is currently trading only 5.2% above its issue price. The company is involved in providing integrated supply chain solutions to its clients. It raised Rs 880 crore through a combination of fresh issue and offer for sale. The IPO was subscribed for 7.6x of the available shares.

Interestingly, its stock price rose by 6% on September 11 following reports of its plans to acquire a 100% stake in three of its subsidiaries for Rs 450 crore. However, the stock fell by 6% on September 12 due to its Q1FY24 loss widening to Rs 65.3 crore.  

Lastly, we have Divgi Torqtransfer Systems from the automobiles & auto components sector. Despite a modest listing gain of 2.6%, the stock is currently trading 65.8% above its issue price. The company raised Rs 412.1 crore via fresh issue and offer for sale. The company won orders worth Rs 549 crore on August 11, which led to a 12.2% surge in stock price on the same day. In addition, multiple bulk & block deals helped the stock to rise by 65.8%.  

One common thread among all 10 IPOs (both most and least successful) in focus is that they are all trading above their issue prices. This means that investors who subscribed to these IPOs are currently in profit, albeit with varying degrees of return on investment. 

As Indian indices continue to hit record highs, the number of companies filing for IPOs may rise, keen to take advantage of the bullish market sentiment. However, investors should look at a company's financial health, industry outlook, and valuation before subscribing.