The unbridled optimism in Indian equities this year has triggered a wave of initial public offerings (IPOs), providing company promoters as well as private equity and venture capital investors a window of opportunity to cash out through public market sales.
In the fourth quarter, too, the momentum shows no sign of slowing, with billion-dollar debuts from giants like food delivery firm Swiggy, LG Electronics, and Hyundai Motor India on the horizon. Consequently, 2024 is shaping up to be a year for the books.
In the first nine months of the calendar year (Q1-Q3), 258 IPOs on BSE Ltd. and the National Stock Exchange of India (NSE Ltd) raised a combined $9.4 billion, according to the EY Global IPO Trends: Q3 2024 report. The IPO volume is up 73% compared with Jan-Sept 2023, while the IPO proceeds more than doubled—up 134%, to be specific—in the period.
In the third quarter alone, India launched over 100 IPOs—the highest level of public offerings in a single quarter over two decades, according to the EY report.
The IPO volume and proceeds as of Sept 2024 have already exceeded full-year 2023 and 2022 levels.
India was also the top destination for public listings globally, with the BSE and NSE hosting 30% of the 870 global initial share sales in Q1-Q3 this year, outperforming bourses in the US (15%), mainland China (8%), and Hong Kong (5%).
In terms of proceeds, US bourses outranked NSE and BSE due to the relatively smaller size of Indian IPOs. At $27.3 billion, IPO funds raised in the US in 9M 2024 accounted for 35% of the $77.6 billion in global IPO proceeds. India accounted for 12% of the global share.
Top and emerging IPOs of 2024
Several high-profile public offerings launched in India in 2024. Leading the pack was Bajaj Housing Finance Ltd., which launched the year’s largest IPO so far in September. Close behind was Softbank-backed Ola Electric Mobility Ltd., a key player in India’s electric vehicle sector, reflecting investor confidence in sustainable mobility solutions.
Softbank-backed Brainbees Solutions, which operates the baby products retailer FirstCry, and Go Digit General Insurance, backed by Canada’s Fairfax, are also among the top IPOs of the year so far.
With several big debuts in the pipeline, Indian bourses may close the year with a higher share of global proceeds. “Although India has predominantly contributed smaller [IPO] deals, it is anticipated that larger transactions will occur, originating either from domestic companies or foreign subsidiaries within the country,” the EY report noted.
Among these IPO-hopefuls is Hyundai Motor India, which will launch a $3.3 billion IPO next week—India’s biggest ever, surpassing LIC’s $2.7 billion initial share sale in 2022. BlackRock, Singaporean sovereign wealth fund GIC, and Capital Group are among those that have made bids to buy shares in the IPO, according to Bloomberg.
“The pipeline [of IPOs] or the supply side looks extremely strong. So is the demand, especially from domestic investors,” Pranav Haldea, managing director at Prime Database Group told DealStreetAsia. “The secular bull run in the secondary market has resulted in a deluge of issues in the primary market,” he added.
Stock market surge
India’s stock markets have emerged as a global standout amid challenges facing economies such as China. India’s healthy economic growth, rising domestic consumption, and the US Fed’s recent interest rate cuts are also tailwinds for the equity market.
“A pivot in [US] monetary policy has investors diverting capital from cash and low-yield bonds to more appealing asset classes, such as equities. Geographically, investors have been shifting capital away from slowing economies, such as China, or geopolitically unstable countries, to more promising markets, including the US and India,” according to the EY report.
The benchmark index BSE Sensex is up 22.43% in the past year, as on Oct 10.
Moreover, healthy IPO returns clocked by companies that have listed recently add to the positive outlook. At 65.3%, India’s year-to-date IPO returns (as of Sept. 16) far exceed that of the US (23.9%), Japan (35.6%), and Mainland China (26.4%), according to EY.
“With a robust stock market, resilient economic fundamentals and declining inflation, India is poised to grow into a prime destination for larger deals. India subsidiaries of several foreign conglomerates are expected to list on the local exchanges in Q4 2024 or H1 2025, capitalising on the favourable market conditions,” the report added.
The wave in the public markets, though, is proving to be a double-edged sword for private capital investors, particularly in the growth stages.
While the favourable IPO climate has helped private equity (PE) and venture capital (VC) investors unlock lucrative exit opportunities, it has also created challenges as late-stage companies, particularly in the tech sector, now feel emboldened to seek higher valuations that match that of their listed peers, as DealStreetAsia noted in a recent analysis.
Nevertheless, the spectre of economic deceleration, the US presidential elections, and continuing geopolitical tensions hangsover the IPO market.
“Obviously, one cannot predict what happens in the future. Unless there is a black swan event, which could also potentially do with how the ongoing geopolitical issues unfold, the IPO pipeline should materialise in the next few months,” explained Haldea of PRIME Database.