India’s equity market is experiencing a surge, and this trend is expected to continue into the new year. High valuations are attracting companies and shareholders looking for funds, while investors are drawn to the stock-price gains, especially amid concerns about China’s economic slowdown.
In a notable shift, India has surpassed Hong Kong in initial public offerings (IPOs) and follow-on share sales for the first time in at least 30 years, with a total of $24.2 billion in sales this year. The positive momentum is fueled by an 18% increase in India’s stock gauge, contrasting with a similar decline in China’s equities benchmark.
Citigroup’s Udhay Furtado notes that India presents a more favorable story for capital markets compared to the rest of Asia, and the market appears wide open. Larger companies are eyeing potential listings in 2024, with Ola Electric Mobility Pvt. planning an IPO of up to 70 billion rupees ($842 million), and other firms like Emcure Pharmaceuticals Ltd. and Happy Forgings Ltd. taking steps toward offerings.
Bhavesh Shah, head of investment banking at Equirus Capital Pvt, anticipates sustained interest in IPOs of high-quality companies in 2024. The prevalence of smaller deals is seen as providing investors with the best opportunities for growth and profitability.
Major investors, including SoftBank Group and the Canada Pension Plan Investment Board, have taken advantage of favorable valuations to sell stakes in companies like Paytm. The second half of the year has seen a significant uptick in IPO activity, largely driven by offerings smaller than $100 million across various sectors.
The performance of newly listed companies has been impressive, with 16 companies that raised between $100 million and $500 million experiencing an average gain of 72% since their debut. This outpaces the 55% gain in the broader Asia Pacific region. Notable success stories include Tata Technologies Ltd., the engineering research unit of Tata Motors Ltd., which has risen more than 140% since its listing last month.
Akshay Sawhne, co-head of APAC equity capital markets at Bank of America Corp., highlights the meaningful increase in IPO activity from India in the second half of the year, with deals trading well in the aftermarket. He anticipates this trend to continue into the next year, with larger IPOs expected to hit the market.
