Initial public offers (IPOs) in the domestic market were quite a hit in 2020, both qualitatively and quantitatively. The number of IPOs and their total mop-ups in 2020 might not have matched those of 2017 and 2018. However, performance of the public offers in the year gone by was very significant, as it defied both economic slowdown and widespread disruptions caused by COVID-19.

There were 15 IPOs on the main board of stock exchanges, which collectively raised Rs 26,611 crore in 2020. This works out to a 115 per cent rise in mop-up from Rs 12,362 crore raised through 16 IPOs in 2019. The public issues in 2017 and 2018 were quite overwhelming, with 36 and 24 main-board IPOs collectively raising Rs 67,147 crore and Rs 30,959 crore respectively.

However, contrary to the main board, activity in the small and medium enterprise (SME) IPO segment was highly subdued, hitting an all-time low in the last six years. According to data, there were only 27 SME IPOs in 2020, which raised a total of Rs 159 crore as against 51 IPOs in the previous year that had raised Rs 624 crore.

Booming market

The boom in the IPO market was also reflected in the larger primary market in 2020. Last year saw a record fund-raising through the public equity markets at Rs 1.77 lakh crore. The funds raised in 2020 were 116 per cent higher than Rs 82,241 crore raised in 2019 and Rs 62,651 crore mopped up in 2018, data provided by Prime Database shows. This also marks the second time in the last decade when the fund-raising streak in the larger primary market crossed the Rs 1-lakh-crore mark, surpassing the previous high of Rs 1.6 lakh crore in 2017.

“Strong retail participation in IPOs, huge listing gains and highest-ever amount raised through qualified institutional placements and infrastructure investment trusts and real estate investment trusts were the key highlights of this year (2020),” Prime Database Group Managing Director Pranav Haldea. Besides, increased global liquidity created by an accommodative stance of central banks, low interest rates and positive outlook on emerging markets, like India, facilitated the large fund-raising in 2020, adds Mr Haldea.

The largest IPO in 2020 was from SBI Cards for Rs 10,341 crore, and the average deal size of the public issues was Rs 1,774 crore. Of the 15 IPOs that got listed last year, 12 issues offered a return of over 10 per cent based on the closing price on listing date. There were blockbuster returns too, with Burger King (131 per cent rise), followed by Happiest Minds Technologies (123 per cent) and Mrs Bectors Food Specialities (107 per cent).

Moreover, the average listing gains from the top 15 IPOs have been a rewarding 35.5 per cent, way above the 22.3 per cent that investors got in 2017. Besides, the average listing gains from IPOs also beat returns from benchmark indices BSE Sensex (15.75 per cent) and NSE Nifty (14.90 per cent) in 2020. While demand from institutional investors was high for public offers like Gland Pharma, demand for Mazagon Dock Shipbuilders and Burger King India saw high demand from retail investors.

The road ahead

Going into 2021, the IPO activity is likely to be dominated by resilient sectors, like new-age technology, healthcare and consumer segments. The public issue market may also get a push from recovering sectors, such as hospitality, commercial real estate and banking, financial services and insurance, according to a Kotak Investment Banking presentation.

Given the robust IPO market, many unlisted corporate entities have started engagements with bankers with a view to list earlier than previously envisaged, notes the Kotak presentation. There is also possibility of many companies backed by private equity investors considering IPOs in the near term. Besides, the government too is looking to divest stake in many PSUs, which may also add glitter to the IPO market in 2021.