Top 5 Most Anticipated IPOs of 2023. The Hype is Real...

In 2022, IPO listings took a breather as the market saw heightened volatility caused by geopolitical tensions and global economic turmoil.

Indian companies raised only half the amount at Rs 570 billion (bn) they raised in 2021, which was the best IPO year in two decades.

The collection would have been much lower if not for the mega Rs 205.6 bn LIC public offer, which constituted as much as 35% of the total amount raised.

However, in the last two months of 2022, IPOs regained their momentum.

This is likely to continue in 2023 despite global uncertainty. India has a robust pipeline of IPOs coming up in 2023. Many companies are expected to go public, taking advantage of the recent IPO boom.

So which companies deserve to be on your radar this year?

Here are five IPOS to watch out for in 2023.

#1 Tata Technologies

First on our list is Tata Technologies.

The company provides services in engineering and design, product lifecycle management, and IT service management to automotive and aerospace original equipment manufacturers and their suppliers.

It is a subsidiary of Tata Motors. Tata Motors has a 74.42% stake in the company.

This IPO is on the radar of investors because it is one of two IPOs by the Tata Group after almost 18 years. The group had come out with the TCS IPO in 2004.

The date for the IPO hasn't been announced yet, but it is expected to come out as early as the June 2023 quarter.

The group has already initiated the process to list the company. Tata Technologies expects to raise somewhere between Rs 35-40 billion (bn), at a valuation of Rs 162-200 bn.

How do the company's financials fare?

The financial statements of the company paint a volatile picture. In the past five years, growth in revenue hasn't been consistent. Profits too, have fallen but not to a large extent. In fact, in the financial year 2021 when revenue fell by 16%, its net profit rose.

However, the outlook is strong. Tata Technologies' revenue is expected to grow 69% to Rs 60 bn by 2025, up from Rs 35.8 bn during 2021-22, driven by an increase in demand in the electric vehicle space and its thrust in the aviation industry.

The company developed its first EV in 2012. Over the last 10 years, it has invested in building skills and intellectual property on EV technology.

With the evolution in the electric vehicle sector, it is likely to witness strong tailwinds in the years ahead, making Tata Technologies a potential investment opportunity for long term investors.

To know more about Tata Technologies, check out our article - Tata Technologies - the next TCS?

#2 Tata Play

Next on the list is another Tata group company, Tata Play.

Tata Play is a leading player in the DTH business. The company was earlier known as Tata Sky.

It also aggregates streaming platforms via Tata Play Binge, which houses around 17 over-the-top (OTT) platforms, and has a broadband service called Tata Play Broadband.

The Tata Play IPO has garnered a lot of interest from investors as it is the first company in the country to use the confidential pre-filing of documents option for its initial public offer (IPO) with the market regulator.

It is also the Tata Group's first IPO since the TCS listing in 2004.

The company is looking to have an initial public offering (IPO) of Rs 25 bn.

Tata Sons owns 41.5% of Tata Play while Disney owns 30% stake in the company - 20% directly and 9.8% indirectly through the acquisition of TPCF Corporation. India is the only country in which Disney has an interest in a distribution platform.

The company is seen as strategically important and adds value to the group's digital growth plans.

Tata Play has a leading market share of 33.2% in the DTH market. So, has this translated into stellar financials?

The financial years 2019 and 2020, will be written in red in the history of financial performances of companies. Tata Play is no exception to that. In the above-mentioned years, Tata Play was a loss making company.

The company reported a muted increase in revenue for the financial year 2022 on the back of the broadband business and traction for the Tata Binge mobile application.

However, profits were under pressure due to operating losses accruing from Tata Play Binge.

The company has a negative net worth and a negative debt-equity ratio. In the past five years, its debt levels have almost remained the same.

Growth in the company's average revenue per user (ARPU) and active subscriber base has also slowed with more people opting streaming platforms for content.

The company faces risk from technological advancements and changing consumer behaviour. The growing popularity of over-the-top (OTT) platforms could be a threat in the medium to long run.

To tackle this, the company plans to increase its subscriber base through Tata Play Binge. Tata Play Binge aims to increase the number of streaming platforms to 25 by the end of the financial year 2023. It had reached 10 lakh customers in November last year.

While the OTT as well as the broadband business should add growth, it will take time before these businesses become cash-flow positive.

To know more details about the company, check out - Tata Play to Finally Launch an IPO. 5 Key Details.

#3 Aadhar Housing Finance

Third on our list is Aadhar Housing Finance.

The company offers a range of mortgage-related loan products, including home purchase, construction, and extension loans. It primarily focuses on providing these loans to lower-income groups in semi-rural and rural areas.

Why are investors eagerly awaiting this IPO?

The company is the largest affordable housing finance company in India in terms of AUM (Assets Under Management).

It has an extensive network of 292 branches spread across 20 states and union territories and operates in more than 12,000 locations across India.

Aadhar Housing Finance plans to raise Rs 73 bn via fresh issue of Rs 15 bn and an offer for sale of up to Rs 58 bn by Blackstone-backed BCP Topco who holds a 98.72% stake in the company.

The US investment firm acquired the stake in June 2019 from Dewan Housing Finance Co. Ltd and the Wadhawan group for around Rs 22 bn. Post-acquisition, Blackstone invested Rs 13 bn more into the company.

Aadhar Housing said it will use the proceeds from the sale of new shares to boost its Tier I capital base to meet future capital needs.

The company had filed draft papers with the market regulator in January 2021 and the issue got stuck for unknown reasons.

The regulator earlier said that it is awaiting a response from another regulatory authority. However, it neither revealed the name of the other regulatory authority nor mentioned what information has been sought from the regulator.

Aadhar Housing Finance's financials have grown at a steady pace in the last five years. The company's revenue has grown at a CAGR of 21% while net profit has grown at a CAGR of 40%.

Its net profit margins have also improved from 14% in 2018 to 26% in 2022.

The company's cost of borrowing has been steadily declining over the last three financial years due to its proactive and flexible fundraising strategy.

It plans to continue to diversify its funding sources, identify new sources and pools of capital and implement robust asset liability management policies.

The company also believes co-lending presents a unique opportunity through the combination of the banks' availability of low-cost funds, coupled with an NBFC (including HFC's) ability to source retail customers.

#4 Fab India

Fourth on our list is Fab India.

The company is a retail clothing company with a physical and online presence that is supported by Wipro's Azim Premji.

Fab India was founded in 1960 by John Bissell to market the craft traditions of India. It started out as an exporter of home furnishings and later diversified into organic foods and personal-care products.

The company's IPO is highly anticipated by investors. This is because of the strong core competency of the company, that is difficult to imitate by competitors.

The expected size of the IPO is Rs 40 bn. Proceeds from the same will be utilised for voluntary redemption of the company's NCDs and for the pre-payment or scheduled re-payment of a portion of certain outstanding borrowings.

The company's promoters have also planned to gift more than 700,000 shares to farmers.

Its financials, however, paint a bleak picture. The revenue of the company has declined at a CAGR of 5% from the financial year 2018 to 2022. The company also posted heavy losses of Rs 1.1 bn in 2021 impacted by the pandemic.

Fab India narrowed its losses after sales rose 29% in the financial year 2022, reversing the performance in the first year of the pandemic when revenues shrunk.

The ethnic retailer posted revenues of Rs 13.9 bn during the financial year 2022 with a net loss of Rs 390 m.

In the DRHP, the company has mentioned about its ESG (Environmental, Social and Governance) initiatives, saying it believes that enabling and uplifting the people it works with have a long and lasting positive impact.

Going forward, the company plans to penetrate the 'non-diaspora' international markets by building a new product portfolio.

Within the country, the Indian retail chain's plans include expansion of physical retail network across geographies, expanding its omnichannel presence and direct-to-customer sales.

#5 Navi Technologies

Last on our list is Navi Technologies.

The company is a technology-driven financial products and services company in India that focuses on the digitally connected young middle-class population of India.

Navi offers services such as personal loans, home loans, and general insurance.

It also offers asset management services. It commenced its operations in February 2021 after the acquisition of Essel Asset Management Company.

Navi Finserv's business - which includes its cash, home, and microfinance lending operations - contributes almost 80-90% to the group's quarterly revenue.

It also represents almost 78% of the group's overall assets under management.

The market regulator has given its approval for the initial public offering of Navi Technologies, which has investments from Flipkart co-founder Sachin Bansal.

Through the IPO the company aims to raise up to Rs 33.5 bn through fresh issuance of shares. The proceeds from the IPO will be used to invest in subsidiaries, Navi Finserv (NFPL) and Navi General Insurance (NGIL), and for general corporate purposes.

The Bengaluru-based company was set up in 2018 and turned profitable in the financial year 2021, when it posted a consolidated profit of Rs 710 m.

However, it reported an overall loss of Rs 670 m in the financial year 2022. Group revenue also fell to Rs 4.6 bn from Rs 7.8 bn a year ago.

Navi had faced a minor setback in May 2022 as the Reserve Bank of India (RBI) declined the banking licence for Chaitanya India Fin Credit Pvt Ltd, its micro-finance entity as it was not found suitable under guidelines.

The company will assess if the regulator is open to having new entrants in the banking sector before reapplying for a licence.

To conclude...

IPOs are an attractive investment avenue as a company that receives a new infusion of capital is likely to grow.

Investing in an IPO is like investing in any other business. So before you plan to invest in an IPO, check the company's fundamentals and prospects.

However, for an unproven business, a product or service with great potential is not enough. You need to give extra weightage to the quality of management and founders.

You must spend enough time assessing their vision, thought process, and execution abilities. Only once you have a 360-degree view of the business, should you go ahead and invest in one.

For more information on IPOs, check out the list of upcoming IPOs.

Since you are interested in IPOs, don't forget to check out top 5 IPOs destroyed Rs 3.5 trillion in wealth and key takeaways of tech IPOs.

Also, watch the below video where Richa Agarwal explains what to look for in a winning IPO.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...