After Fabindia and Joyalukkas that shelved their IPO plans recently due to unfavourable market conditions, Mamaearth’s parent Honasa Consumer is said to be holding its IPO plans. Analysts noted that many well-tracked 2021-2022 debutants are trading at levels that are well below their listing prices; some of them even saw battering post the end of lock-in periods, analysts noted. Dampening the IPO market sentiment further is the weakness in the secondary market in the backdrop of foreign outflows, the Adani-Hindenburg row and the banking crisis in the West, they said.
In fact, 2023 has been emerging as the driest year for IPOs since 2020, with just two IPOs hitting the Street so far, data compiled from PRIME Database suggests. This is against six mainboard IPOs that hit the market in the first 3 months of 2022 and 16 IPOs that hit the Street between January and March 2021. In 2020, only one IPO had hit the Street till March.
Sebi recently returned the preliminary papers of half a dozen companies, including Oravel Stays, which operates hospitality chain OYO, in over two months. These companies have been asked to re-file their draft red herring prospectus with certain updates, PTI reported.
An analyst with a domestic brokerage, who did not wished to be named, said IPOs’ asking IPO valuations are under scrutiny. He cited intensified selling on a few 2021 debutants due to stake sale by key shareholders post the one-year lock-in expiry. While the recent two IPOs Global Surfaces and Digvi TorqTransfer Systems did perform well, the analysts said there are concerns new IPOs may not garner good response amid weakness in secondary markets globally.
In the case of Mamaearth, a Reuters report quoting a source said: “In preliminary informal checks with investors, there was a difference in the valuation that the company was seeking and what investors were willing to give.”
Astha Jain of Hem Securities noted that 2021 was the year where there was ample liquidity globally. But 2022 and 2023 saw money tightening, which has lifted dollar and made emerging markets unattractive.
After single-digit returns in 2022, the secondary market returns in 2023 have been negative, with equity barometers Sensex and Nifty falling 5-6 per cent. This is having a bearing on IPO decisions.
“Investment bankers, promoters of IPO-bound companies do track market behaviour and as long as the weakness in the secondary market persists, one must not expect flurry of IPOs in coming days. We see the fourth quarter of FY23 and the first two quarters of FY24 to be muted, and the market may probably revive from September onwards,” said Astha Jain of Hem Securities.
Jain noted that foreign outflows have been among the reasons behind the tepid market sentiment and once the dollar loses its strength, the domestic market, both primary and secondary, may see revival, she said.
Sanathan Textiles, Imagine Marketing, Capillary Technologies and Asianet Satellite Communications are among companies, which received Sebi nod for public issues last year, but are yet to announce IPOs. The one-year period for these companies will lapse next month, as per PRIME Database.
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