When the tide rises, a lot of boats turn up to ride the wave. As Indian markets hit record highs, multiple companies - both SMEs and mainstream - have been launching IPOs on a near daily basis. According to Trendlyne’s IPO dashboard, 2024 has seen a record 204 companies list on the exchanges so far.
Most of these companies are raising funds for expansion, working capital and to pay their debts. Some big-name IPOs are also coming up:
Swiggy, the food delivery platform became a unicorn by making our food cravings - like midnight chicken biryani - too easy to satisfy. It is reportedly set to file its IPO prospectus with SEBI in early September. Last week, the Indian IPO scene was buzzing with Ola Electric's debut, which surprised everyone by soaring to hit the upper circuit on the first day. The stock is currently up 80% from its issue price.
How has the IPO landscape fared overall, in this year’s booming equity market? Let’s dive in.
In this week’s Analyticks,
- Indian IPO market: Number of listings zoom, success rate climbs
- Screener: IPOs with rising revenue and net profit YoY in Q1FY25
Indian IPO market switches to top gear in 2024
The IPO market struggled in the pandemic year 2020, with a 15% fall in number of listings. But listings recovered from 2021, and the record number of new public offerings in 2023 made it the ‘Year of IPOs’.
But 2024 is set to take the ‘Year of IPOs’ crown from 2023. Trendlyne’s IPO dashboard shows 121 IPOs listing between January and August 2023. This puts 2024 already ahead, with 204 IPOs listing over the same period.
2024 on track to see the highest number of IPOs listed in six years
India used to be a laggard in IPOs (especially pre-covid), with few large deals. That has changed. According to Dealogic, India now ranks as the second biggest IPO market, behind only the US and ahead of Japan, UK, Saudi Arabia and China, with firms collectively raising $32.6 billion this year till August 6 in the equity capital markets.
Indian equity capital markets collectively raise $32.6 Bn in 2024 – next only to the US
This is good news for investment banks, which hold road shows, talks and strike deals with qualified institutional investors (QIBs) for subscriptions in the IPOs they are underwriting. Ola Electric and FirstCry IPOs alone made investment banks Rs 241.4 crore. The fees earned from IPOs in the first seven months of 2024 have almost matched the total fee earnings for all of 2023.
Investment banking companies rake in fees from large issue-size IPOs
The excitement in IPOs this year being driven by institutional investors. In 2024, QIBs have had an average subscription rate of 80.1 times in IPOs, compared to 33.2 times from retail investors.
QIBs and HNIs are driving the IPO market
The vast majority of Indian IPOs list in the green
Over the past six years, the total number of Indian IPOs listing with gains has steadily increased. As of August 19, 90% of all IPOs in 2024 (mainline and SME) have listed above their issue prices, with a median listing gain of 36.3%.
IPO success rate climbs: Most list in the green
When it comes to mainline IPOs, 78% of them listed above their issue price. Only 10 mainline IPOs listed at a discount. Out of these 10 IPOs, one sector appears twice - Banking and Finance. Two banks, Jana Small Finance Bank and Capital Small Finance Bank, fell 11.1% and 7.1% lower than their issue price on the listing day, respectively.
Worst performers: Two stocks from the banking & finance sector fall on listing day
Despite listing at a discount, J G Chemicals and Jana Small Finance Bank recovered significantly and are now comfortably trading above their issue price.
Consumer services and commercial services IPOs most successful, banking and finance sector disappoints
The average listing gains/losses differ from sector to sector. In 2024, the Diversified Consumer Services sector saw the highest number of IPOs, followed by Banking and Finance, which was the favorite in 2023.
Banking & Finance IPOs disappoints in 2024 despite higher number of listings
A total of five banking and finance companies listed in 2024 and the highest listing gain was for Go Digit General Insurance, which listed at a 12.5% premium to issue price. Two IPOs (Capital Small Finance Bank and Jana Small Finance Bank) listed at a discount to the issue price.
The Metals and Mining sector saw the highest average listing gains in 2024, thanks to the most successful main line IPO of 2024 - Vibhor Steel Tubes, which rose a staggering 195.5% premium to the issue price on the listing day.
But the aura around this stellar listing quickly faded and the stock has fallen sharply, while still trading comfortably above its issue price.
The 'list high, fall later' trend among IPOs
A pattern of 'list high, fall later' is visible for the most successful IPOs. Among the top five IPOs of 2024, only one (JNK India) now trades above the listing day gain. All other four IPOs have fallen since listing day. Vibhor Steel and BLS E-Services have seen a sharp fall.
If an investor had bought Vibhor Steel in the public market after seeing the high listing gain, they would be sitting at 44% losses now. Retail investors will have to be careful in assessing the IPOs both before and after listing.
Among the top five IPOs of 2024, only JNK India holds gains after listing
With five months left in the year, India's IPO landscape is bustling with activity. Top IPOs that investors are waiting for include Hyundai Motor India, ACME Solar Holdings, and Hero FinCorp among others. Companies rushing to list is another signal of confidence in the Indian economy, but institutions could be gaining a lot more than retail investors in the IPO frenzy going on.
Screener: IPOs with rising revenue and net profit in Q1FY25
Banking IPOs see YoY growth in revenue and profit in Q1FY25
With the end of the result season, we look at the top-performing mainline IPOs listed in 2024 in terms of revenue and net profit growth in Q1FY25. This screener shows IPOs listed in 2024 with rising revenue and net profit YoY for the quarter.
The screener is dominated by stocks from the banking & finance, commercial services & supplies, and diversified consumer services sectors. Major stocks that appear in the screener are EPACK Durables, Rashi Peripherals, Bansal Wire Industries, Jana Small Finance Bank, Go Digit General Insurance, Entero Healthcare Services, Aadhar Housing Finance, and Juniper Hotels.
EPACK Durables has the highest revenue growth of 77.2% YoY to Rs 779.8 crore in Q1FY25, while its net profit rose by 168% YoY to Rs 23.4 crore during the quarter. This commercial electronics manufacturer’s revenue increased on the back of the commissioning of the Sri city manufacturing plant, and an improvement in the AC products segment. Its net profit growth was driven by revenue growth outpacing the rise in expenses.
Entero Healthcare Solutions also appears in the screener with its net profit improving the most, by 221.8% YoY to Rs 20.1 crore in Q1FY25. This healthcare services company’s revenue also grew by 22% YoY to Rs 1,110.5 crore, outperforming the Indian Pharmaceutical Market (IPM)’s growth of 9% YoY during the quarter. Improvement in supply to retail pharmacies and hospitals led to revenue growth, whereas, net profit rise was on account of inventory destocking and lower finance costs.
You can find some popular screeners here.
