India’s Best and Worst Performing IPOs of FY23

The year FY23 just concluded and even a cursory look would be enough to tell you that for the IPO market, it was far from gratifying. Especially, when you compare the IPO collections to the previous FY22, it is less than half in FY23. Total IPO collections in FY23 were just about Rs. 53,338 crore; with a total of 37 IPOs on the IPO mainboard. That is lower than the 53 IPOs in FY22 and nearly Rs. 120,000 crore collection in the previous fiscal. More importantly, it must be remembered that FY23 was largely redeemed by the LIC IPO, which at Rs. 20,500 crore accounted for nearly 40% of total IPO collections of FY23. In fact, if you add up LIC and Delhivery, they accounted for 50% of the total IPO collections in FY23. However, despite a tough year, the IPO collections in FY23 were the third best ever; after FY22 and FY17.

FY23 IPO story in some revealing numbers

It is said that numbers speak louder than text so here is the summary of FY23 in numbers. There were some areas were the IPO story in FY23 fell short. For instance, FY23 saw just 37 IPOs against 53 IPOs in FY22. Also, the collections for FY23 at Rs. 53,338 crore were less than half of what IPOs collected in FY22. However, the fact that mega IPOs like LIC and Delhivery go through smoothly is indicative of the fact that appetite was still there. In fact, the best barometer of appetite was revealed by the fact that the total amount for which applications were received were Rs. 539,151 crore. That is overall subscription of 10.11 times for FY23 overall and is encouraging. To sum it up, amidst tough macros, the IPO market did show a lot of resilience and character. It was not as good as hoped, but not as bad as feared.

Best and worst performing IPOs for FY23

Let us now turn to the best and worst performing IPOs for FY23 based on post-listing returns. These are just absolute returns and have not been annualized.

Data Source: NSE (CMP as of close of 31st March 2023)

Two IPOs in FY23 delivered post listing returns of over 100% viz. Hariom Pipes and Venus Pipes. But, at a broader level, the numbers were quite encouraging. For example, the top 5 gave more than 50%, the top 8 gave more than 30% and the top 10 gave more than 20%. Let us now look at the negative returns on IPOs in FY23 and here are the bottom-10.

Data Source: NSE (CMP as of close of 31st March 2023)

Among the 10 biggest IPO falls in FY23, only 1 IPO (Elin Electronics) fell by more than half. The pressure is evident from the fact that LIC was the second worst performing IPO with -43.62% returns. With a strong retail franchise, the LIC IPO did have a depressing impact on the IPO market sentiments in FY23.

Was IPO performance linked to the subscription levels?

It would be natural to believe that higher level of IPO subscription would be consistent with higher returns. To test this idea, let us look at some data points.

• Out of the to 10 IPOs in terms of returns, only Dreamfolks Services got subscribed more than 50 times. However, DCX Systems got subscribed 69.79 times and it is among the top losers in FY23. In the top 10 gainers, only five of them have double digit subscription levels. Ironically, the two IPOs that actually got undersubscribed are trading above their issue price. That really raises questions over the link between IPO returns and the levels of IPO subscription.
   

• However, for the real clue, you need to look at the median subscription. For FY23, the median subscription was 5.85 times. What is evident from the list of top gainers and top losers is the number of stocks above median and number of stocks below median. For instance, 8 out of top 10 gainers had subscription above the median while only 2 out of 10 IPOs in the bottom-10 list had subscription levels above the median. More than anything, if the subscription level is above the median, then there is a much better chance of being a better performer. Of course, there will be exceptions.

How to sum up the IPO story of FY23?

It is tough to say if there is any direct linkage between subscriptions and returns since markets have behaved both ways. What is clear is that the companies that leave something on the table for investors are the ones that really give good post listing returns. That is something that worked in FY21 and FY22 also and investors in IPOs must focus on that.

One disappointment for FY23 was that despite 65% of the IPOs giving positive returns and a 10.11 times overall subscription, the performance of LIC and Delhivery, post listing, has had an impact on overall returns. For instance, for an investor putting money in all the IPOs, there would have been negative returns of -12.43% in FY23. However, this would have transformed to 7.92%, had LIC and Delhivery been skipped. Somehow, the data continues to be against large sized IPOs in India.