Red herring draft prospectus filings more than halved in FY23 as concerns over high valuations, geopolitical tensions and rising interest rates dampened equity sentiment.

According to the Prime Database, only 66 companies have filed offer documents with the SEBI, a 54% decrease from the 144 drafts filed in FY22.

A total of 34 companies have conducted IPOs worth Rs 51,482 crore and listed on the exchanges by FY23. In comparison, 53 companies listed after IPOs worth Rs 1.11 lakh crore in FY22.

Companies typically raise capital through stock sales when secondary market sentiment is positive. However, current market conditions are far from ideal, with many companies withdrawing their IPO paperwork because they do not want a good share price. The benchmark BSE Sensex has gained 0.7% over the past year.

Additionally, investors are wary of public companies underperforming their IPOs over the past 18 months.

In FY23, there were fewer IPO filings due to the poor performance of high-priced IPOs in FY22. These IPOs, including those from Zomato, Paytm, Nykaa, and PB Fintech, were able to command inflated valuations by posting massive growth amid the pandemic in FY21.

However, after the successful listing, the focus shifted to profitability as growth rates slowed in subsequent quarters, resulting in a valuation that fell by two-thirds of the listing price.

Analysts are optimistic about the Indian primary market, expecting them to remain strong and accept quality companies despite the challenges.

Given current market conditions, other companies are preparing for an IPO but are waiting for the ideal time to file their IPO paperwork with regulators. Sood expects some pharmaceutical, industrial and real estate companies to issue shares soon.