The primary market is on cloud nine. In the 11 months of 2023, 47 companies have successfully raised Rs 44,298 crore through initial public offers (IPO). SME IPOs have also seen a record run during the same period of 2023. Some 91 small businesses have mopped up close to Rs 2,327 crore through their maiden offers on the SME platforms of BSE and NSE. 

In fact, the third week of November was incredibly the busiest one for the IPO market. That fascinating week witnessed investors pouring an unprecedented Rs 2.6 lakh crore into six issues that had collectively put Rs 7,380 crore of shares on offer. The public issue of Tata Technologies was entirely snapped up in just two hours of the first day of IPO, leaving the offer sold by multiple times. Many other issues were subscribed several times over, giving little respite for number-crunching issue managers.  

The IPO boom of 2023 is a confluence of several factors. The buoyant primary market of this year follows a rather subdued 2022 and a robust 2021. Surging secondary market, private equity investors looking to cash out, new young investors making a beeline for stocks on offer and deepening equity market have all contributed to a blockbuster 2023.  

Interestingly, an excellent track record of public offers that have hit the market this year is fuelling the frenzy in the primary market. Most of the issues have had stellar debuts this year, with double-digit returns that have even spilt into triple digits in some cases. Stock prices of over 90 per cent of the companies that have listed this year are trading above their issue price. 

The excitement in the primary market is doubled by the bullish secondary market. Against a backdrop of global uncertainty, Indian benchmark indices have gained around 9 per cent in 2023 so far. The broader market has done much better at over 30 per cent, with small- and mid-cap stocks rallying to their multi-year highs. 

The huge appetite for equities stems from the confidence that investors have in the India growth story and the large universe of fast-growing, well-managed companies. A huge of army of investors has entered the stock market indirectly by parking their savings in mutual fund schemes through the most-popular systematic investment plans (SIP). 

Meanwhile, Indian equity culture has really spread wider and penetrated deeper into the country. The year is silently turning out to be a big one for companies emerging from India’s smaller towns. Many of these companies are also smaller in size and scale and also belong to traditional sectors. About half of the companies that have listed on the mainboard of stock exchanges are located in tier-II cities and smaller towns. From small-town Davanagere in Karnataka to Faridabad in Haryana, companies across diverse industries have made their IPO debut with lowest issue size as little as Rs 66 crore. 

Much of the credit for smooth functioning of IPO market must go to the Securities and Exchange Board of India (SEBI). Many investor-friendly measures of the markets regulator – such as ASBA, reduced timeline for listing and so on – have inspired confidence among investors and are wooing them to stock market. 

These are really interesting times for stock market and investors. But euphoria in the past has turned sour, owing to greed of some dubious promoters of companies, unscrupulous scamsters and even reckless investors. The markets regulator and the investors must remain extra vigilant to ensure that promoters do not jack up their IPO issue prices to unreasonable levels. Vigilance, after all, will be a reasonable price to keep the IPO party going.