Year 2022 IPO collections halve over previous year

Year 2021, was a record year for IPOs raising close to Rs. 130,000 crore through the IPO route, including the Yes Bank FPO. In comparison, the IPO story in 2022 was a lot more tepid. Despite the benefit of having the mega LIC IPO in 2022, the overall IPO collections at Rs. 64,700 crore for the full year 2022 were just half of the IPO flows in 2021.

Here are some quick observations from the IPO data for 2022.

1. Digital IPOs were the missing link in 2022. If there were a total of 10 digital IPOs in the year 2021, the year 2022 saw just one digital IPO of Delhivery Ltd. However, like the other digital IPOs, Delhivery also ended the year in the red.
    

2. During the year 2022, a total of 40 IPOs tapped the IPO market compared to 63 IPOs in the year 2021. However, IPO collections in 2022 were less than the IPO collections for the year 2021.
    

3. In the year 2022, 60% of the IPOs gave positive returns with 24 out of the 40 IPOs ending the year in the green. It is an irony that the last 10 IPOs of 2022 were all in the red as of the last trading day of 2022, but that could be due to shorter time frame for analysis.
    

4. The subscriber interest was still quite robust during the year 2022 with the overall IPO subscription coming in at 9.7 times on an aggregate. However, the undertone on the retail end was tepid with QIBs contributing most to the oversubscription in 2022.
    

5. The 3 largest IPOs of the year viz. LIC at Rs. 21,008 crore, Delhivery at Rs. 5,235 crore and Adani Wilmar at Rs.  3,600 crore jointly accounted for 46% of the IPO collections for the whole of 2022.

Leaders and laggards among IPOs for 2022

Let us now turn to the best and worst performing IPOs of year 2022 based on post-listing returns. Here we look at give of the top performers in terms of absolute returns for the year and five of the bottom performers among IPOs for the year.

Data Source: NSE

Ironically, two of the largest IPOs of 2022 were among the bottom performers of 2022 viz. LIC and Delhivery Ltd. There were 3 IPOs giving more than 100% returns since listing with the top 5 IPOs delivering more than 50%.

Some key observations from the IPO story of 2022

One question that does possess us is what drove outperformance and underperformance during the year. Was it subscription levels or was it size of the issue? Let us look at some hard evidence.

• Out of the top 10 performers in the year 2022, five of the IPOs were subscribed less than 10 times. So it canoe be about size alone. of less than 10 times. Let us look at the top losers. Ironically, the bottom IPO performer was subscribed nearly 8 times. What really matters is the number of companies above the median subscription levels. In the top 10 list, the number of companies with above median level subscription is a lot more. So subscription level did matter, but only up to a point.
   

• Let us turn to the issue of size. Since two of the largest IPOs of 2022 viz. LIC and Delhivery were in the red, one may be inclined to believe that size works against IPO performance. Once must not forget that the top performer for the year was the third largest IPO of Adani Wilmar. It must be noted that 4 out of the top 10 IPOs were above Rs. 1,000 crore were 8 of 10 bottom IPOs were under Rs. 800 crore. Once again, size may appear to matter, but it is more about the returns that companies and investment bankers leave on the table for investors.

Was year 2022 a year to celebrate for IPOs or a year to forget? Purely by collections, it was half of 2021. However, on the positive side, the massive value destruction by digital new age companies that we saw in 2021 was not visible in 2022. Had an investor put equal amounts of money passively in each of the 40 IPOs, they would still be sitting on a year-end profit of 13.8%. Interestingly, had the same investor given LIC and Delhivery a miss, the full year return would have doubled to 25.5%

In a sense, year 2022 was tepid but it also saw an element of rationality return to the IPO markets. Markets still need to good stories at attractive prices and such issues still make profits for investors. The onus in year 2023 will be on the issuers and the investment bankers to offer this rather salivating combination to the investors.