Indian IPO market poised for strong growth as dust settles on election results
Summary
- India's IPO market is set for a boom with 55 companies planning to raise over ₹68,000 crore. Despite recent shareholder caution, robust investor interest and policy stability are expected to drive major deals
India's primary market will be abuzz with activity over the next few months, with 55 companies planning to raise over ₹68,000 crore through initial public offers (IPOs), according to data from primedatabase.com. In the current fiscal year so far, seven issues have mopped up ₹19,455 crore, while another five are set to hit the markets in June. This follows a robust 2023-24 when 76 companies went public, raising ₹61,922 crore. However, a record ₹1.1 trillion was garnered by 53 companies in FY22.
"There was a lot of volatility around the exit polls and eventual election outcome. However, not only has it stabilised, a lot of buoyancy has also returned, which bodes well for the primary market, " said Pranav Haldea, managing director, Prime Database Group. “Domestic investor liquidity remains abundant and signals from the government regarding policy continuity have bolstered market confidence as a result of which we shall hopefully see some major deals in the coming months across a range of sectors," he added.
The market regulator has already granted approvals to 17 companies to raise nearly ₹ 11,946 crore, with an additional 38 companies awaiting approval for a combined amount of around ₹56,405 crore.
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"The quality of management is paramount when considering an IPO investment," said Anand Rathi, co-founder of Mira Money. He advises investors to focus on a company's management history, financial performance, and compliance record before making an investment decision. Rathi expects e-commerce, manufacturing, and NBFC companies to be particularly active in the upcoming IPO wave.
Off late, public offers have garnered an impressive response from investors. Data analysed by Mint for 459 IPOs that hit the markets since 2018-19 showed that median subscription ratio more than doubled to 44.4 times in the last fiscal compared to 20.2 in 2022-23 and it was nearly 34 times higher than FY19, data sourced from Capitaline showed.
But did these bets pay off well? In a separate analysis, of 121 IPOs that got listed in the last two years, a quarter of them are still trading at loss to their issue price and another 24% of them are trading between 10% and 25% above their issue price. Another 17 stocks in the sample are trading more than 50% to their issue price
Looking ahead, experts believe the Indian IPO market will remain robust in the coming years, driven by the country's economic growth and a shift in global investor focus from China to India. "Despite potential valuation adjustments due to the new government, a healthy pipeline of offerings is expected," said Atul Parakh, CEO of Bigul. Sectors like e-commerce, traditional retail, infrastructure, and electric vehicles are anticipated to see billion-dollar deals.
“Ample liquidity and a potential shift towards lower interest rates in the second half 2024 further support the positive outlook. However, regulatory measures to curb aggressive pricing and ensure market stability are crucial for sustainable growth," he said.
