IPO Slowdown: Subdued growth owing to geopolitical and economic constraints

The recently witnessed growth spurt in the Indian equity market appears to have lost steam. This is due to market players be­ing cautious about investing in new offerings, given that the majority of them are trading at a discount on the bourses. India’s initial public offering (IPO) market is currently in a dire situation, with 51 companies raising Rs 381.55 billion through IPOs in the first eight months of 2022 via the primary market, compared to Rs 647.68 billion raised by 55 companies during the same period in the previous year. IPOs in the infrastructure space continued to be subdued, barring a few notable outliers. So far in 2022-23, of all the companies that have gone public, the lion’s share of Rs 205.57 billion was raised by the public issue of the Life Insurance Corporation of India. In June and July, there was a rapid surge of companies filing preliminary IPO papers with the Securities and Exchange Board of India (SEBI). A total of 15 companies approa­ched SEBI with their draft papers to raise capital through initial share sales.

In the past five years, the logistics and railway industry has dominated IPO activity in In­dia, with six railway IPOs and eight logistic IPOs. In 2022-23 (till September), four cross-sector infrastructure companies came out with IPOs. The amount raised via infrastructure IPOs in 2022-23 (till September) increased 150.61 per cent year on year from Rs 9.72 billion in 2021-22. This increase is primarily driven by Delhivery’s public issue.

In accordance with the ongoing regulatory developments aimed at enhancing disclosures and market practices, there have been a number of recent amendments, including a change in disclosures for the object of the offering, re­vised norms for credit rating agencies (monitoring proceeds), and revised norms for the price band (wherein a 5 per cent cap must be maintained between the floor price and upper

pri­ce). In addition, SEBI produced a consultation paper on the “Basis of Issue Price”, which included new characteristics such as key performance indicators to be reported, especially for loss-making enterprises.

Global trends

The global IPO market continues to plummet in the third quarter of 2022 owing to factors such as stock market volatility, high interest rate, and high energy and commodity prices given the geopolitical strains and economic slowdown due to the pandemic. As the end of 2022 approaches, all these variables are creating headwinds for risk assets.

As per an EY study on global IPO trends, in 2022, year-to-date (YTD), a total of 992 IPOs have been launched, raising $146 billion, a 44 per cent (volumes) and 57 per cent (proceeds) year-on-year decrease respectively. As in the past year, IPO businesses and investors continued to witness macroeconomic concerns, market uncertainty, mounting volatility, and plummeting global share prices in 2022 as well. Although the average deal size decreased from $261 million to $123 million year on year, the number of IPOs in the technology sector remai­ned the highest.

While the energy sector surpassed in proceeds with the largest increase of 176 per

ce­nt, driven primarily by three of the world’s top five deals in 2022 (YTD), the consumer pro­ducts sector saw the biggest drop in the average deal size of 69 per cent. The third quarter of 2022 witnessed the lowest special purpose acquisition company (SPAC) IPO proceeds sin­ce the third quarter of 2016, as de-SPACs stru­ggled to identify the ideal targets. In the first quarter of financial year 2023, the SPAC market was constantly challenged, with only 17 tra­nsactions raising $0.9 billion.

There is a need for a more stable and optimistic stock market sentiment to ensure sustained enthusiasm for IPO activity among global companies and investors.

Company activity

GR Infraprojects made a strong market debut in July 2021 as its IPO was listed at a 105 per cent premium and subscribed 102.58 times. Logi­stics giant Delhivery became the first unicorn to gain regulatory approval to list on the domestic bourses in 2022. With an issue price of Rs 487 apiece (upper band price), Delhivery allotted 48 million shares to 64 anchor investors including Tiger Global, Bay Capital, Steadview and Fidelity. The company was able to raise around Rs 52 billion through its IPO in May 2022.

In May 2022, Inox Green Energy Services Li­mited’s board approved a proposal to raise Rs 9 billion through an IPO. Later, the ancillary of Inox Wind, Inox Green Energy Services, listed fresh preliminary papers to raise Rs 7.4 billion instead, and received SEBI’s go-ahead for the same in September 2022.

In June 2022, JM Baxi Ports & Logistics

Li­mi­ted announced plans to file draft papers for an IPO worth around Rs 25 billion (around $315 million). In the following month, Go First announced its plan of raising money through an IPO due to stressed financials following the pandemic.

Since its approval from SEBI in December 2021, Sterlite Power Transmission Limited has been awaiting favourable market conditions for launching a planned IPO of Rs 12.5 billion. The transmission company has chosen to withdraw the draft red herring prospectus (DRHP) due to the volatility of current markets and the limited time period allowed under the currently filed DRHP. In addition, there are a host of companies with public issues on the anvil.


There are mixed expectations from the perfor­mance of IPOs and the equity capital markets. The fundraising across IPOs, qualified institutional placements, rights issues, infrastructure investment trusts, real estate investment trusts, and preferential allotments could be subdued given the overall fundraising trends in the equity capital markets, which decrea­s­ed to Rs 1.01 trillion in the first half of 2022, from Rs 1.26 trillion in the same per­iod in the previous year. As of August 2022, SEBI has authorised 28 companies to raise a total of Rs 450 billion th­rough IPOs during the period April-July 2022-23, while 11 debutantes have already raised over Rs 330 billion. These companies belong to a wide range of sectors such as consumer, ph­a­rmaceuticals, technology, logistics and financial services.

IPOs in India are anticipated to regain their recent momentum in the first quarter of 2023-24 given the market’s underlying strength. This also hinges on high interest rates and recessionary fears. In contrast to the previous trend, when primarily large- and medium-sized companies pursued IPOs, a large number of organisations are now considering going public. In addition, market activity has increased due to iss­uances from mature and stable companies in need of growth capital. Some of the IPO activity in the past year has given way to recent secondary share sales, which are more expedient and provide holders with the opportunity to monetise their positions.

Ishita Gupta and Harman Mangat