InvestorQ : How is the IPO scene looking like in the second half of 2022, with the IPOs almost drying ujp for now?
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How is the IPO scene looking like in the second half of 2022, with the IPOs almost drying ujp for now?

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Niti Shenoi answered.
1 month ago
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In the first half of calendar year 2022, a total of 16 IPOs were launched. That too happened in the first five months as the month of June did not see a single IPO. However, there was no let-up in the pace of approvals as a total of 67 IPO approvals were done during the first half. However, since June, the sentiments around the IPO market have soured due to factors like the Russia-Ukraine war, high oil prices, inflation concerns and policy tightening.

This has forced a lot of IPO issuers to be cautious despite getting the requisite approvals from the authorities. This is reflected in the lower number of primary market issues. Also, the local market conditions are not conducive. For example, the Nifty has fallen more than 9% percent in the current calendar year and is down 15% from the peak levels and that has also made many of the IPO issuers very cautious about coming out with an issue now.

The market sentiments surrounding the IPO scenario are also not too favourable. The negative sentiments are on account of pressure caused by FII selling. We have seen the strength of the DIIs in terms of buying but FPIs have sold nearly $35 billion since October and that is starting to weigh. Also, HNI flows that are normally funded for the IPOs are also wary of taking on added interest cost due to tepid IPO performance in the recent past.

A total of 67 companies have received approval from SEBI, where the SEBI has given its observations after reviewing the draft red herring prospectus (DRHP). One more big challenge is that the regulator gives the IPO approval valid for a period of 1 year and if the IPO is not completed by then, then the company needs to approach the regulator once again for a fresh approval. That is again going to be time consuming.

Some of the big names that have received SEBI approval and are just awaiting the right time for the IPO include names like PharmEasy, MobiKwik, Go Airlines, Bharat FIH, TBO Tek, Suraj Estate Developers, FedBank Financial Services, Archean Chemical Industries, Aadhar Housing Finance, BoAt, Harsha Engineers, FabIndia, Asianet Satellite Communications, and Syrma SGS Technology. These are all large sized IPOs and would wait for conducive environment.

In addition, there are nearly 38 companies that have filed DRHP with SEBI and are still awaiting approval or where SEBI has sought some clarifications which is still pending. These include Snapdeal, Droom Technology, OYO, Allied Blenders and Distillers, Navi Technologies, EbixCash, Paymate India, Biba Fashion, KFIN Technologies, Joyalukkas India, etc. These are going to be some time away for now.

Finally, tepid listing has been another big challenge. For instance, half the stocks this year trade below their issue price, with stocks like AGS Transact losing over 60% over the issue price. LIC has been another big disappointment. Adani Wilmar and Veranda Learning were the two stocks that really showed solid gains. Others like Aether, Campus, Hariom Pipe Industries and Vedanta Fashions gained over 10% since listing. It is over to the H2.

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