In 2022, IPOs experienced a very different rollercoaster ride due to volatile market conditions fueled by macroeconomic uncertainties, interest rate hikes, and geopolitical tensions. The IPO market saw lackluster demand in the early months of 2022, and major startups launching their IPOs also corrected sharply post-listing. However, the second half of 2022 has seen some traction and stability, but investor demand has been volatile. Funds raised through IPOs in 2022 have halved compared to the previous year.
As part of the primary market, IPOs are issued in two types such as: B. “Reissued” and “For sale”. As part of the offer to sell, selling shareholders participate by giving up part of their interest in the company to be listed. When it comes to new issues, the company uses the funds for future growth plans. However, IPOs pave the way for the company’s securities to be listed and traded in the Indian markets.
With the year 2023 approaching, it’s important as an investor to look for a valuable IPO that has the potential to generate good returns. Certain mistakes can be avoided when investing in the IPO market.
Here’s a list of mistakes an investor can avoid when investing in IPOs, according to Manoj Sharma, co-founder &; Deputy CFO of the Group Policybazaar.com and Paisabazaar.com.
1. Don’t think about investing every time I go public. An investor should plan to only invest in select IPOs that they believe offer better prospects for the company and are not valued on the higher side.
2. Don’t invest solely on the basis of information that is circulating on the Internet. Sometimes these are managed by the companies and their advisors.
3. If an IPO is oversubscribed in the first 1-2 days, then one thinks that one should also apply. They anticipate that the stock will be overbidden and it will open at a huge premium. This could definitely be a good job by the company’s banker for the IPO, but the expectation of a huge price gain/premium may not be true.
4. Only invest the funds that are available for at least the next 1-2 years. Borrowing/funding to invest in an IPO should be avoided.
5. There are few online websites that provide information on upcoming IPOs. They also spread some news/rumors about the prevailing pre-listing premium. Investors should avoid making investment decisions based on such misleading and unsubstantiated news.
6. If recent IPOs have produced record returns, that doesn’t mean the upcoming IPO will also produce similar returns. Sometimes people hear messages from their friends and colleagues that they’ve invested in an IPO and made good returns. They feel like missing out on such opportunities and applying for the next upcoming IPO without going through the details and using their brains.
7. Brand Name: A well-known or popular brand name does not mean that you have a reliable chance of listing a prize/award. You should check the valuation at which shares are being offered.
8. Multiple Demat Accounts: Sometimes individuals apply for an IPO through their multiple Demat accounts linked to the same PAN, believing that their chances of being allocated will increase. That is not true. You should only apply from one demat account as other duplicate applications will not be considered.
According to the Prime Database report, a total of 40 Indian companies have merged in 2022 €59,412 crore via mainboard from IPOs – that’s nearly half of the funds raised €1,18,723 crore with 63 IPOs in 2021. The IPO market was at an all-time high in 2021.
The data also showed that overall public equity fundraising also fell by 55% €90,995 crore from €2.02.048 million in 2021.
In the motherboard IPOs of 2022, the largest public offering over the past year, which is also the largest Indian IPO ever in history, would be that of state-owned Life Insurance Corporate of India (LIC). It was followed by Adani Wilmar, the FMCG player of Delhivery and Adani Group, whose IPO was in the process €5,235 crore) and €3,600 crore or
In a statement, Pranav Haldea, Managing Director of PRIME Database Group, said: “As many as 17 of the 40 IPOs, or almost half, occurred in the last two months of the year alone, demonstrating the volatile conditions that prevail for most of the year , which are not conducive to IPO activities.”
For 2023, Prime Database announced that the pipeline remains strong. 54 companies are proposing to raise a huge sum €84,000 crore are currently SEBI approved. Another 33 companies are looking for an increase €57,000 crore awaiting SEBI approval. Of those 87 companies, 8 are NATCs seeking an approximate increase €29,000 crores.
According to Haldea, the momentum of the last two months of 2022 should continue, at least for the smaller IPOs. However, it may be a while before we see any bigger deals, especially given the lack of sustained interest from FPIs.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms and not Mint. We advise investors to consult certified professionals before making any investment decisions.
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