India’s IPO market is poised for continued strength this year after the number of listings increased by more than 65% last year. The anticipated boom comes as the organizations take advantage of the nation’s robust economic growth, young population, and the government’s surging focus on digitization.
Overall, when 2023 ended, the Indian stock market had over 243 companies. This was the highest annual tally in at least six years, according to S&P Global market intelligence data.
The IPO landscape in 2024 looks dynamic, with various high-profile organizations expected to go public. However, your investment approaches and market conditions will play a crucial role in evaluating the success of the upcoming IPO 2024.
But before you streamline and shape your investment decisions for 2024, here’s what you need to know about IPO.
What is an IPO?
An IPO is a public offering in which the shares of a private organization are made available to the public for the first time. An IPO enables the organization to raise equity capital from public investors.
The transition from a private to a public organization will be essential for private investors to realize the gains from the investment. Generally, it includes a share premium of recent private investors. Meanwhile, it also enables the public investors to participate in the offering.
Steps of an IPO
Now that we know what is an IPO, let us take a look at the steps of an IPO:
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Proposals
Underwriters’ current proposals and valuations concern their services, the best security to issue, the granting price, the number of shares, and the predicted time frame for the market offer.
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Underwriter
The organization selects the underwriters and formally adheres to underwrite the terms via an underwriting agreement.
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Team
IPO teams generally comprise lawyers, underwriters, SEC experts, and CPAs.
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Documentation
Data concerning the organization will comply with the needed IPO documentation. The S-1 registration statement is the primary IPO documentation. It has two parts: the privately held filing information and the prospectus.
The S-1 generally includes preliminary data regarding the expected date of filing. It will be revised throughout the pre-IPO process, and the prospectus will also be subject to revision.
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Updates & Marketing
Marketing materials are developed for pre-marketing purposes for the new stock issuance. Executives and underwriters market the share issuance to evaluate demand and set a final offering price. Throughout the marketing procedure, these underwriters can make revisions to the financial analysis.
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Board and Procedures
Form a board of directors and ensure the procedures for reporting accounting and financial information are auditable annually.
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Share issuance
The organization issues the shares on an IPO date. Capital from the primary issuance of the shareholders is obtained as cash and recorded as stakeholder’s equity on the balance sheet.
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Post IPO
Some post-IPO provisions can be subject to the institution. Underwriters can purchase an extra number of shares after the IPO date.
Smaller organizations are talking about the IPO Route
Times have changed, with funding for startups in India failing by almost 72% from 2023 to 2022. It is also apparent with the decrease in the number of organizations that have turned unicorns. Back in 2022, the number of enterprises that turned unicorns was 22. However, there is a twist. Only two organizations turned unicorns in 2023: Zepto and Incred Finance.
It has led to a surge in organizations increasing their capital from the stock markets. Conventional IPOs have been surging steadily in the last couple of years.
In FY24, there were 78 IPO listings, of which around 40% saw over 25% gains on the listing day. These IPOs accumulatively raised over 64,000 crores, averaging 866 crores per issue.
However, it is more than just the large organizations going toward the IPO. Smaller organizations have been embracing the trend of IPO. It can be seen in the numbers.
What is the outlook of the IPOs?
IPO activity began to pick up in recent months and should accelerate in the back half of 2024. It is noted that it is not unusual for the IPO market to open and close. When financial markets are strong, the public offerings tend to be robust and vice versa.
Additionally, the surge in interest rates has left the markets discombobulated, especially regarding growth stocks and IPOs.
Surge of SME IPOs
Small IPOs have consistently outperformed their mainboard counterparts by granting investors strong returns and higher interest. In 2022, there were 19 issues worth 109 billion, compared to 47 issues worth 182 billion in 2023.
Outperforming their larger counterparts, SME IPOs have become a great investment option. They boast a median investment gain of 12.1% compared to 8% of the mainboard organizations. Their median annualized returns since the listing hit 61%, surpassing the 52% of the established items.
Advantages of IPO
One key benefit is that the organization gets access to investment from the whole public to raise capital. This ensures accessible acquisition deals and enhances the company’s exposure, public image, and prestige, which can help the organization’s profits and sales.
Enhancing transparency, along with needed quarterly updated reporting, can assist an organization in receiving more favorable credit borrowing terms than a private organization.
Wrapping Up
When an organization decides to raise money via a new IPO, it only happens after careful strategy and analysis. There are various IPOs set to be introduced this year. If you are planning on indulging, get in touch with Motilal Oswal today. From listing to extensive research of the insights of the upcoming IPOs, Motilal Oswal is your one-stop shop for all your investing needs.
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