The Indian primary market is currently experiencing a surge in activity, with 72 initial public offerings (IPOs) launched so far this year. Among these, 28 are listed on the BSE main board, while the remaining 44 are SME IPOs.
What’s noteworthy is that 62 out of the total 72 IPOs are trading above their issue prices, indicating strong bullish sentiment in the secondary market. This IPO boom can be attributed to investor confidence in India’s robust macroeconomic outlook and healthy corporate earnings, particularly benefiting the mid and small-cap segments.
A surge in IPOs often coincides with a surge in small and mid-cap segments. This is because nearly 95 percent of IPOs, in terms of numbers, come from small and small-cap companies. Thus, the positive sentiment in the secondary market for small and mid-caps spills over into the IPO market.”
Market experts and participants anticipate that this IPO boom will continue in the short term. In September alone, more than 40 IPOs are planned, with around 28 already launched. Retail investors are playing a significant role in fueling this IPO frenzy due to the upbeat market sentiment.
Founder and CEO of SAS Online, highlights that the surging market, driven by ample liquidity and a strong secondary market, is the primary catalyst for India Inc.’s increased capital mobilization through IPOs.”With the market gaining momentum, retail investors are flocking in, adding to the excitement. There’s a growing belief that we’re in the midst of an IPO boom.”
However, experts caution investors not to get carried away and advise them to invest only in IPOs of companies with strong governance, solid financials, and sustainable business models.
Director of Strategy at SKI Capital Services, warns, “It’s essential to proceed with caution. Financial booms are often followed by corrections, and the Indian market is likely to be no exception. Market corrections can separate the quality companies from the rest. Therefore, focusing on value-driven and quality-oriented business models is crucial.”
Investors are expected to become more discerning over time, prioritizing good governance, solid financials, and sustainable business models. The sustainability of this IPO boom depends on the quality of the companies going public. In the long run, only enterprises demonstrating robust performance and transparent practices will continue to attract capital.”
