Year-Ender 2022: What led to sluggish and sombre performance of IPO market this year? Experts decode

Year-Ender 2022, IPO Review 2022: After a blockbuster performance in 2021, the primary market predominantly portrayed a sluggish and sombre show this year. The IPO (Initial Public Offer) markets raised over Rs 55,000 crore through 32-34 issuances in 2022 as compared to Rs 1.2 lakh crore through 65 issuances in the previous year.

Several analysts believe the subdued performance of the primary market in 2022 against last year was mainly due to the tightening of liquidity, uncertainty caused by global headwinds and sharp correction in recently listed companies that dampened the sentiment for overall IPOs.

As per Bhavesh Shah, MD - Consumer & Healthcare Banking, Equirus, “The lackadaisical IPO market phenomenon has largely been dominated by the second half of the year – on the back of global uncertainties, inflation and rising interest rates which have impacted liquidity in the markets.”

There are around 70 companies waiting in the wings to see the light of day for IPO after receiving Draft Red Herring Prospectus (DRHP) clearance from SEBI, according to the MD - Consumer & Healthcare Banking at Equirus.

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However, Shah added that the listing performance of the IPOs during the year was fairly robust with 75 per cent of the issues listed so far faring well on the day of listing with the closing price being higher than the IPO price.

In several cases, the prices have improved subsequently, and over 84 per cent of the IPOs listed this year are trading above the issue prices the Equirus analyst said, adding that the institutional buyers have largely been extremely selective in investing and have refrained from sticking their neck out to anchor their position in the IPOs.

Moreover, secondary markets were also volatile which further dampened investors’ confidence in the primary issuances, Poonam Tandon, Chief Investment Officer at IndiaFirst Life Insurance said.

Out of the 32 listings so far, 23 companies have had positive listings and 9 companies have had negative listings with an average listing day gain being 13.8 per cent, Amar Ambani, Group President & Head - Institutional Equities Head, YES Securities said in his comment.

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On the SME front, as many as 104 companies have come to the primary market and raised Rs 18 billion and did see the best time in the recent past as a lot of stock enriched investor wealth, Ambani added.

Even the PE (Private Equity) backed IPOs, which were the driving force of the primary market last year, saw a lacklustre year, Sumit Chanda, Founder & CEO, JARVIS Invest noted. “One can expect a turnaround before the end of the fiscal given the number of companies who have received regulatory nod but have not come out with an IPO yet,” he added.

Meanwhile, Apurva Sheth, Head of Equity Research, Samco Securities believes, nonetheless, the IPO market has again started to pick up pace as inflation has started to cool down and the financials of companies look presentable.