Mankind Pharma, the maker of Manforce brand condoms and pregnancy test kits, rallied 32% on its debut on the Indian stock exchange, setting the stage for other IPO hopefuls in an otherwise muted public market this year.
Shares of the pregnancy test kit Prega News maker opened 20% above the IPO price at Rs. 1,300. The stock touched a record high of Rs. 1,430 in the session.
Mankind’s strong IPO, the biggest of 2023, comes against the backdrop of several IPO-bound companies either postponing or calling off their plans. Several others also trimmed their target IPO size to more modest levels.
“…Mankind’s IPO should mark the comeback of main board IPOs, especially the ones with profitability and a strong business model. This is also a testament to the fact that the winter is only for businesses where profitability and sustainability are a challenge,” said Manish Khanna, co-founder of Unlisted Assets.
Anchor investors including the Canada Pension Plan Investment Board, the Government of Singapore, and Abu Dhabi Investment Authority, collectively purchased shares worth about Rs13 billion during the offering. The company did not issue any new stocks.
Founder at Interface Ventures Karan Desai said the clear takeaways from the Mankind IPO are that there is enough and more interest and capital available for solid Indian businesses that wish to go public basis fair valuations.
“What makes the response to the issue even more remarkable is that the entire Rs4,200 crore+ IPO was an offer for sale (OFS), with no primary infusion into the company. This can be attributed to the company’s consistent 20%+ ROE, strong networth, and extremely low leverage,” Desai added.
Muted market
Several factors including a market correction, high valuation multiples and low earnings of the IPO hopefuls, outflow of foreign capital amid rising interest rates, governance problems at large corporations, and more stringent norms by Sebi have resulted in the weak IPO sentiment.
High-quality and high-growth companies will continue to attract investor interest for IPOs,” said Raja Lahiri, partner at consulting firm Grant Thornton, adding, “However in my view given the global macro trends investors are likely to adopt a cautious approach in IPOs and some sort of price moderation and valuations may also help to enhance investor interest.”
“I don’t think one IPO or stock can make such a large market better or worse. Mankind is a fundamentally sound business and has done so well even in a tough global macro environment. I know founders will look at the Mankind IPO and say good times or bad, if we are a strong company, India is a great place to list.” Pranav Pai, founding partner at 3one4 Capital, told DealStreetAsia in an interview.
Earlier this year, Indian skincare startup Mamaearth said it is putting its IPO on hold, while SoftBank-backed Indian hotel aggregator OYO Hotels and Homes Pvt Ltd is now reportedly looking to raise $400-600 million, compared with its earlier plans to raise $1.02 billion.
The top companies that went public in 2022 have not performed well in the stock market.
The largest IPO in 2022, which was also the largest Indian IPO ever, was from Life Insurance Corporation of India, followed by Delhivery. Shares of LIC that listed at Rs 949 apiece, are now trading at Rs 535 per share, while Delhivery’s shares are down to Rs 316 per share from Rs 1,685 per share at listing.
In contrast, 2021 was a blockbuster year for IPOs. Five unicorns — online food delivery giant Zomato, fintech giant Paytm, multi-channel auto platform CarTrade.com, beauty marketplace Nykaa, and insurtech player PolicyBazaar — made a debut on the Indian bourses that year.
The stocks of most of these companies have been trading way lower than their IPO prices, causing the tide to turn in 2022.
Fintech major Paytm has lost more than 75% of its market value since listing. Paytm raised $2.5 billion in one of the country’s biggest-ever IPOs in November 2021. Food delivery firm Zomato’s shares have halved from their all-time highs after listing in July 2021.
Earlier, Indian apparel retailer Fabindia, backed by billionaire Azim Premji’s fund, and jewellery retailer Joyalukkas said they are scrapping their IPO plans.
Last year, Indian drug and medical services startup PharmEasy withdrew the draft red herring prospectus (DRHP) it filed with India’s markets regulator, the Securities and Exchange Board of India (Sebi), and wearables startup boAt froze its plans to go public.