Investor sentiment fizzles out in IPO mart. What's in store for rest of the year?

As equity markets turned volatile in the new year, fundraising in the primary markets too took a back seat with just one IPO hitting the bourses so far in 2023.

The year recorded just one IPO with an issue size of $8 million, compared with three IPO issues, raising $1 billion in the same period of last year. QIPs, on the other hand, too were muted compared to two issues raising $264 million over YTD 2022.

Equity markets were plagued by a host of issues this year including rising interest rates, slowing economic growth, Adani crisis and the latest fallout of the banking crisis in the US. Benchmark Nifty is currently 10% down from its peak.

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Pune-based automotive component Divgi TorqTransfer was the sole public issue that came up this year, which was subscribed 5.44 times, led by strong interest from retail investors. The offer comprised fresh equity issue worth Rs 180 crore and an offer for sale (OFS) of 39.34 lakh shares by investors and other selling shareholders.

The shares listed at a mild premium of 5% on NSE and 1.6% on BSE over issue price. Market analysts attributed the muted listing to unfavourable market sentiments.

Global Surfaces IPO is the second issue this year and the issue is still available for public subscription. The offer was subscribed 3.85 times so far on Day 2. The issue consists of fresh issuance of 85.20 lakh equity shares and an OFS of up to 25.5 lakh equity shares by promoters.

Negative investor sentiments is one of the key reasons why primary market fundraising remained muted in the current year.

"With the Nifty down by around 10% from the peak and underperforming other markets in 2023, the sentiments have turned negative. This is not a favourable time for IPOs and NFOs. Attractively priced IPOs will attract investors but it would be a tough time for NFOs. Investors should remain invested and a good strategy would be to continue investing through SIPs in existing funds," said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

As many as 48 companies including Navi Technologies, Biba Fashion, Macleods Pharma are sitting on approvals from the market regulator Sebi (Securities and Exchange Board of India), but haven't yet come to the markets, according to Axis Securities.

Further, about 29 companies including Tata Technologies, Go Digit Insurance have filed IPO papers with Sebi, but are awaiting approvals from the regulator. The marquee public offer of Tata Technologies will completely be an OFS of up to 9.57 crore equity shares by promoters and selling shareholders.

"Market sentiments --- clearly pessimistic owing to a host of issues --- play a role when companies plan to go public. I think the second half of the year of at most the third quarter of FY24 could be strong for the primary market. The first half will be the case where a lot of companies will still think twice before hitting the markets," said Astha Jain of Hem Securities.

"The dollar has kind of peaked, which would be positive for emerging markets, particularly India, where foreign fund flows could return to the country. This might improve the overall market mood," Jain added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)