India Host to Multiple $100 Million IPOs

After the disappointment of hyped mega-share sales, small is beautiful in India's market for initial public offerings. Investors have lost money on IPOs in the last two years, from finance startup Paytm to the country's largest insurer. They've turned to companies offering up to $100 million in stock sales, with India hosting the most such listings this year, according to data.

Small businesses are selling stock to meet their financing needs after interest rates rose, taking advantage of a five-month market rally. While such listings typically have poor trading liquidity and lax disclosure rules, retail investors are ignoring those concerns and bidding more than 100 times the offer price for some IPOs.

"IPOs are the result of a stock market bull run," said Abhishek Sharma, managing director at GYR Capital Advisors. "Increased retail and institutional investor participation is providing these companies with tailwinds."

Despite the highest interest rates since 2018, India's major equity benchmarks have reached new highs, as earnings and the economy grow. The SME IPO index has outperformed the benchmark Nifty 50 this year, rising 26% year on year.

Most recent offerings by small and medium-sized businesses were oversubscribed. The IPO of dronemaker ideaForge Technology Ltd received 106 times the amount sought, while the IPO of mid-sized Utkarsh Small Finance Bank received bids up to 102 times the amount sought.

The SME IPO boom followed the dismal performance of insurer Life Insurance Corporation of India Ltd. and delivery startup Delhivery Ltd, the two biggest share sales of 2022. They are down about 33% and 18%, respectively, from their sale prices. Payments application Paytm’s parent One 97 Communications Ltd is also trading more than 60% below its offer price.