EY IPO trends report: IPO activity remains stable with brighter outlook

• Globally, India is positioned 1st in terms of number of IPOs in Q1 2023
• Strong pipeline for IPOs in H2 2023 and beyond; around 15 companies have filed their DRHPs in Q1 of 2023
• Increase of 33% in the total number of IPOs in Q1 2023 as compared to Q1 2022

Mumbai, 27 April 2023: According to the Q1 2023 IPO trends report released by EY, in Q1 2023 there have been 4 IPOs vs 3 IPOs in Q1 2022. During Q1 2023, proceeds raised through the main markets equated to US$ 107 m via 4 main market IPOs compared to US$ 995 m during Q1 2022, which is a decline of 89% in proceeds raised and an increase of 33% in the number of deals. This is in line with the recent global experience of the reduction in issue size. The SME segment raised US$ 82 m via 38 IPOs during Q1 2023 vs 31 IPOs in Q1 2022 raising US$ 37 m which is an increase of 23% in the number of deals and 123% in proceeds raised.

We continue to see robust activity in the private market wherein PE/VC investments in 2023 have started on a positive note with Jan 2023 investments being higher than the previous month by 30% in terms of value, though lower than Jan 2022 by 17%. The scarcity of larger rounds witnessed in 2022 is expected to continue into 2023, and investors are expected to be very selective.

As per the report, the largest IPO in terms of proceeds was Divgi TorqTransfer Systems Pvt Ltd. raising US$ 50 m. It further states that there is a strong pipeline for IPOs in H2 2023 and beyond. Around 15 companies have filed their DRHPs in Q1 of 2023 as compared to around 10 companies that filed their DRHPs in Q4 of 2022. These include companies across various sectors such as consumer, pharmaceuticals, technology and financial services.

Adarsh Ranka, Financial Accounting Advisory Services Leader, Partner with an Indian member firm of EY Global said, “India is a bright spot in the global economic landscape. While the IPO activity has remained subdued, companies are using this period to be better prepared for launching their IPO early next year (Pre or post Indian general elections).”

Veenit Surana, Partner, EY India said, “The India IPO market has shown resilience and growth in Q1 2023, despite ongoing global uncertainties and relatively smaller issue size. The market's strength is a testament to the Indian economy's potential for growth. We expect IPO momentum to increase in the future, with domestic and international investors playing important roles.”

The report also states that, globally, India is positioned 1st in terms of the number of IPOs in Q1 2023 although much of this is attributed to small-ticket IPOs. Nearly half a dozen companies have withdrawn their IPO filings due to market conditions or the regulator (SEBI) has returned their offer documents in the last quarter. While the reason for returning these offer documents varies, the regulator requires the companies to be fully compliant at the time of filing.

In line with continued regulatory developments aimed at enhancing disclosures and market practices, there have been a number of recent amendments such as disclosure of Key Performance Indicators (KPIs), track record of information on the pricing of shares frgom private equity/investors, enabling confidential IPO filings, a committee of Independent Directors to recommend that the price band is justified based on quantitative factors, increased responsibility of audit committee, etc. 

On the one hand, these changes enhance the Indian capital markets and lay a solid framework for future IPO activity and governance. On the other hand, companies must continue to be aware of the rigorous standards of preparation required to successfully list and operate as a listed company.

While the IPO market has been tepid, the market is expected to recover and volatile stock activity is to stabilise.

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