Too early to say that the primary market is experiencing a revival

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  • Even after the Syrma The IPO of SGS has received an overwhelming response, experts believe that another IPO season is not on the horizon.
  • Regulatory approval for at least 30 IPOs received in the past fiscal year will expire by the end of the year. 31 IPOs were approved this fiscal year.
  • Companies will monitor the performance of upcoming IPOs and secondary markets before opening issuances, say two market experts Business Insider spoke to.

Even before the public offering of Syrma SGS Tech was oversubscribed 33 times last week, three companies – Digit General Insurance, Concord Biotech and Balaji Solutions – had filed their documents with the market regulator in the third week of August to make them public.

Another DreamFolks IPO is set to open for subscription this week. Still, experts aren’t convinced another IPO season is on the horizon.

“It is too early to say that the IPO season has started. Many companies in the pipeline will be watching for two things – the response that upcoming IPOs will get and also market dynamics. If markets remain volatile, companies will let their approvals expire,” Pranav said. Haldeachief executive of Prime Database, told Business Insider India.

While a few companies like PharmEasy, Inox Green Energy and Nandan Terry have withdrawn their draft documents, abandoning plans for an IPO, the approvals of at least four other companies will expire by the end of August. Approvals for another 15 will expire by the end of the year.

“IPOs are a once-in-a-lifetime event for companies and they would want to do it at the perfect time. If the market doesn’t give them the valuation they expect, they won’t go ahead,” said Haldea.

Only Utkarsh Small Finance Bank re-filed its IPO paperwork, even as many other companies that planned to go public in the past fiscal year let it lapse.

More than 32 IPOs that received a green light in 2021-22 have been put on hold, while another 31 received approval in 2022-23. Of those 31 in the current fiscal year, only Syrma and DreamWorks have gone ahead and opened their shows to the public.

Many companies file DRHPs assuming the problems will subside, but a number of factors such as valuations and demand for new issues among domestic and foreign investors play a key role. “There are 10 to 12 conditions that they have in mind when filing and many of those conditions can change,” said Arun Kejriwal, founder of Kejriwal Research and investment services.

A large number of last year’s IPOs which are still ongoing, had issue sizes between ₹400-800 crore. However, there are a few like Emcure Pharmacy which also planned to raise over ₹4,500 crore. The decision to go ahead with an IPO will not depend on the size of the issuance, but on the pricing, says Kejriwal.

“When the momentum is good, subscriptions and quotations good, it is possible to slip in a bad issue, but not when the market is still picking up. After RBI capped the amount that HNIs (high net worth individuals) can borrow to invest in IPOs at ₹1 crore, they will have to invest their own funds and that will make a huge difference to subscriptions,” says Kejriwal.

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