87% IPOs of FY25 trading above issue prices; is listing gains driving primary market?

At a time when geopolitical uncertainty, market volatility, fragile global economy, and rising interest rates have dampened investors’ interest for equities, the initial public offerings (IPO) market remained unfazed by these factors. Investor enthusiasm for IPOs have touched a new high, as indicated by record subscription and strong listing gains, which is prompting companies to go public in order to raise funds for future investments as well as to encash high demand, liquidity and optimism in the primary market.

As many as 28 companies (main board) have taken IPO route to raise a total of ₹40,332.68 crore in the first five month of the current fiscal, as compared to ₹14,418.62 crore garnered by 17 firms during the same period last fiscal. Overall, 76 Indian corporates raised ₹61,915 crore through main board IPOs in FY24, up 19% against ₹52,116 crore mobilised by 37 IPOs in FY23, according to primedatabase.com, which tracks the primary capital market.

The overall response to IPOs has been excellent, especially from retail investors, driven by strong listing performance. The average listing day gains (based on closing price on listing date) of the 30 IPOs listed in FY25 (as of September 10) is 33.5%, which increased from 29% in FY24 and 9% in FY23. In comparison, the Indian equity benchmarks - Sensex and Nifty delivered over 10% returns so far in the financial year 2024-25. 

Out of the 30 listed entities, 87% or 26 stocks are trading above their issue prices, with 3 delivering more than 100% returns. Premier Energies, which raised ₹2,830.40 crore via IPO, topped the chart with 160% returns in just six sessions since its listing on stock exchanges on September 3. This is followed by Bharti Hexacom and Unicommerce eSolutions with 100% and 101% gains, respectively. Among others, Awfis Space Solutions shares traded 97.5% higher over the issue price, while TBO Tek stock has risen 93% against the IPO price.

India has emerged as the world’s hottest market for IPO activities, with 153 companies (main board and SME) hitting Dalal Street in the first half of this calendar year. In H1 CY24, 38 main boards and 115 small and medium enterprises raised ₹34,923 crore, which is 3.5 times more than the ₹9,886 crore mobilised by 82 IPOs (10 main board & 72 SMEs) in the same period last year. Most of these IPOs were small to medium-sized, mostly from industrials, consumer, materials, technology, and health and life sciences. This accounts for 27% of worldwide IPOs by deal volume and 9% in terms of proceeds, positioning the fifth largest economy at the forefront of global IPO activities in the first half of 2024, as per the latest EY Global IPO Trends report.

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