IPO Market Reviving After A Lull As 70 Companies Waiting To Raise Funds

After a dull beginning in 2023, the IPO market appears to be reviving with more than 70,000 crore worth of IPOs in the pipeline and 70 companies waiting to raise funds.

"We do see a renewed opportunity to launch IPOs and hence we believe a lot of the pipeline will be cleared," S Ramesh, MD & CEO of Kotak Mahindra Capital Company told businessline in a recent interaction.

While the secondary markets were buoyant, India was still at the initial stages of an IPO market recovery, S Ramesh added.

With foreign portfolio investors pumping in around $20 billion into the country in 2023 so far, Ramesh feels that "India offers a hope of an oasis in the global deal drought", as per the The Hindu Businessline report.

Here are edited excerpts from the interaction.

Q The IPO market seems to be reviving after a lull. Is this sustainable?
Yes, we do see a renewed opportunity to launch IPOs; hence, we believe a lot of the pipeline will be cleared. There are two interesting aspects to the success of IPOs during this period. One, we are seeing good interest from Indian institutions, especially mutual funds and two, we are witnessing realism in valuations with issuers and selling shareholders. The increased interest from FPIs, as we have seen recently, undoubtedly improves the deal's success.

Q Do you see the buoyancy in the secondary markets spilling over into the primary market?

While the secondary markets are buoyant, we are still in the initial stages of an IPO market recovery. Investors today are more forthcoming on investments in IPO than 3-6 months back, and given the tailwinds, have a lot more confidence in company financials and performance.

To give some data, since 2020, IPOs have been dominated by issue sizes greater than Rs 1,000 crore (2020 - 87%, 2021 - 88%, 2022 - 80%, and 2023 YTD - 71%). In the current calendar year, only two issuances with issue sizes greater than ₹1,000 crore - Mankind Pharma and Nexus REIT. However, there are green shoots of revival as the pipeline has IPOs worth $5 billion (₹40,000 crore) with SEBI approval and $4 billion (₹33,000 crore) awaiting approval looking to hit the market at an opportune time, stated The Hindu Businessline report.

Q India is receiving a substantial portion of emerging market inflows from FPIs. What drives this, and do you see the inflows as broad-based or in specific sectors?

FIIs have been major buyers in consumer names, financials, and industrials as most of FPI flows have been passive, and these sectors constitute around 60 per cent of the NSE500.

Major factors attracting FII flows to India over other emerging markets are - higher growth prospects for the Indian economy aided by advantageous demographics, labour reforms, infrastructure boom, stronger tailwinds for manufacturing, and comfortable external sector balance.

There is political stability, and we can withstand shocks like geopolitical tensions that happened last year, control over inflation and interest rate hikes. FPIs are also encouraged by the outperformance of India vis a vis other countries, especially China, which has not given investor returns or comfort in investing, added The Hindu Businessline report.

Disclaimer: Except for the headline, this story has not been edited by Goodreturns staff.