Monday, February 24, 2025

IPOs are back on the menu for India’s rising elite

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After a brief post-pandemic lull, India’s affluent are again betting on initial public offerings (IPOs) to make a fortune.

Sample this: Of 159,784.16 crore, 91 main-board companies collectively raised through public issues in 2024, 20,000 crore came from high-net-worth individuals (HNIs).

HNIs are people who have investable assets exceeding 5 crore.

To be sure, HNI subscription to IPOs peaked at an average of 203.28X (over 26,000 crore in absolute terms) in 2020, the year of covid-19 outbreak, and has been declining since.

However, 2024 marked a revival, with subscription levels climbing to 104.80X—the highest in three years, showed data from Prime Database.

Risk appetite

Investment bankers believe that impressive listing gains during the post-pandemic bull run have fueled investor confidence, prompting them to allocate funds to this high-risk, high-reward segment.

Milind Muchhala, executive director at Julius Baer India, highlighted that the post-covid surge in equity-driven wealth creation has significantly boosted investors’ risk appetite. IPOs, often delivering impressive listing gains (or even gains in the unlisted market), have instilled greater confidence among HNIs. “Considering the recent returns profile in the small- and mid-cap IPOs, HNIs are particularly drawn to this segment.”

Of the 159,784.16 crore, nearly 33,000 crore came from retail investors. Meaning, HNIs and retail investors accounted for one-third of the capital raised.

That said, IPOs are just one facet of measuring investor enthusiasm and confidence for equities. Since 1 January 2020, the Nifty is up 91%.

Bullish attitude

Affluent Indians’ high-risk appetite seems to be driving this heightened interest in equities. “The propensity to take risk is higher amongst first-gen HNIs,” said Sandipan Roy, chief investment officer at Motilal Oswal Private Wealth Management.

Post-pandemic years have seen new-age wealth creators leverage strategies like investment portfolio diversification across asset classes and geographies, establishing family offices to navigate complex wealth structures and facilitate intergenerational wealth transfer, and adopting technology-driven solutions for efficient wealth management.

“HNIs are increasingly allocating investments to alternative investment funds (AIFs), portfolio management services (PMS), and HNI-focused mutual funds, with their share of total assets under management (AUM) rising to 45% in 2023-24 from 34% in 2015-16,” said a 10 January report from JM Financial Institutional Securities.

Rising elite

This also coincides with a wealth wave in the country. A dynamic startup ecosystem and rising corporate profits have resulted in an extraordinary surge in the number of HNIs and ultra-high-net-worth individuals (UHNIs).

According to Hurun India, the bar to join the rich list was set at 1,000 crore, with 1,539 individuals making the cut in 2024—220 more than in 2023. The number of dollar billionaires also went up by 75, reaching 334.

“A surge in entrepreneurship, particularly in sectors like technology, e-commerce, and healthcare, has led to the emergence of numerous HNIs,” Vivek Rathi, national director-research, Knight Frank India.

 

Moreover, “Indian businesses are increasingly expanding globally, leading to increased revenues and wealth accumulation,” he pointed out.

Rathi also highlighted that Mumbai continues to house more HNI and UHNI populations, adding that Hyderabad and Bengaluru are also emerging as strong contenders in wealth growth.

Not just that, Rathi projects a remarkable 50.1% surge in India’s UHNI population, anticipating it to climb from 13,263 in 2023 to an impressive 19,908 by 2028.





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