Blockbuster IPO season breaks 11-year-old unhealthy OFS record

The flood of initial public offerings (IPOs) on Dalal Street in 2024, which has given an average of about 47% return, has broken an unhealthy 11-year-old record when the amount of offer for sale (OFS) was larger than fresh issue.

Since 2012, which was a dry year for IPOs with only 11 issues, all subsequent years have seen a clear bias towards OFS. The highest such offloading of stake by promoters and other investors was seen in the Covid year of 2020 when nearly 87% of all fundraising in the primary market was done via OFS.

So far in the calendar year 2024, the amount of fresh issue in mainboard IPOs has been higher at Rs 33,574 crore vs OFS of Rs 30,904 crore. Out of the total fundraising of Rs 64,477 crore in 2024 IPOs, 52% has been a fresh issue, shows data from Prime Database.



"This is a healthy trend being seen in the primary market as it reflects that companies are bringing out IPOs primarily for capacity expansion, diversification, etc. Fresh issue also signals that companies are bullish on their growth prospects," Bharat Lahoti, who runs Edelweiss Recently Listed IPO Fund, told ETMarkets.

Even some smaller companies are using the buoyancy in the capital market to build a war chest for acquisitions and growth.

In earlier years, many companies were bringing out IPOs to deleverage their balance sheets. "By now most of the deleveraging has already happened. India Inc's balance sheet is not as highly leveraged anymore and so now most of the money is going towards capex," the fund manager explained.

Also read | IPO investing using grey market numbers is like forming government after exit poll: Nilesh Shah

In 2024, the market has seen companies like Ola Electric Mobility raising Rs 5,500 crore via fresh issue, Bajaj Housing Finance (Rs 3,560 crore) and Firstcry (Rs 1,666 crore). Besides, IPOs of Juniper Hotels (Rs 1,800 crore), Jyoti CNC Automation (Rs 1,000 crore) and Bansal Wire Industries (Rs 745 crore) were entirely fresh issues.

Pranav Haldea of Prime Database reminds investors that some companies which raised only fresh capital in the 1990s and 2000s either ran away with investor’ money or failed to implement their business plans causing tremendous loss to investors.

“Earlier companies were coming to the primary market for risk capital. Now for the last 10-15 years, this risk capital is being provided by angel investors, venture capitalists and private equity investors. By the time they come to the IPO market, they have already reached a certain size and scale. They also have established corporate governance practices,” Haldea said.

Therefore, he said, OFS vs fresh issue should not be the deciding factor for investors while applying for an IPO. “You look at the quality of the company and the valuation at which it is being offered and then take a call,” he suggested.

IPO pipeline

Whenever the secondary market shows a bullish trajectory, the primary market gets busy. 2024 is all set to be the best year for IPOs, in terms of the number of mainboard issues, since 2007 when 100 IPOs were launched. The current year has already seen around 62 IPOs.

The IPO pipeline for the rest of the year also looks very healthy as well as exciting. Hyundai Motor India is gearing up plans to launch India's largest IPO ever of Rs 25,000 crore in the next 1-2 months. Softbank-backed food delivery giant Swiggy has also received a Sebi nod for its IPO. The company is seeking a valuation of over Rs 1 lakh crore and plans to raise around Rs 11,000 crore through the IPO, which is expected in November.

Other IPOs expected in the next 3 months are those of Waaree Energies, Mobikwik and NTPC Green.


Also read | Sensex up 850 times in 45 years! Will it hit the 1,00,000 milestone in FY25?

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