“On the IPO front, momentum remains strong in India, with around 87 companies currently filing for IPOs with Sebi (Securities and Exchange Board of India),” said Neha Agarwal, managing director & head of equity capital markets at JM Financial Institutional Securities.
Also read: The best and worst IPOs of 2024. And next year’s big 3.
Analysts expect profitable companies with large free cash flows to perform well in the current IPO cycle as investors are leaning toward firms with a stable financial outlook. Agarwal said, “This trend is likely to persist, especially for businesses with strong fundamentals and resilience against macroeconomic pressures”.
Prashant Rao, director and head of equity capital markets at Anand Rathi Investment Banking, noted that while recent IPOs have faced some short-term resistance, with low subscription levels and listing gains, the long-term outlook for the primary market remains strong.
IPO pipeline set to expand
According to a recent note by Axis Mutual Fund, “IPO pipeline for the second half of the (fiscal) year is nearly three times the amount raised in the first half, with 91 companies looking to raise $17 billion in aggregate.” In recent weeks, another 70 listed companies have received board approval to raise a total of $16 billion through qualified institutional placements (QIPs). Additionally, secondary stake sales from promoters and private equity are expected to increase, driven by expiring lock-ins and high trading multiples in the market.
Companies that have received approval for IPOs from the capital markets regulator include NSDL, Avanse Financial Services, Vishal Mega Mart, and Manjushree Technopack. Those that have filed offer documents with Sebi and are awaiting approval include Hero Fincorp, JSW Cement, Ecom Express, Ather Energy, Hexaware Technologies and HDB Financial Services, according to data from Prime Database.
Also read: Early investors cheer Swiggy’s listing pop, but analysts are mixed on the stock
The surge in IPO activity reflects growing optimism about India’s economic outlook, driven by broad-based growth across sectors and rising opportunities for small mid-sized companies. This is prompting more firms to raise capital for expansion and innovation. Additionally, good IPO returns over the past year have further fueled investor enthusiasm. So, the wider expectation is that demand for quality IPOs will remain strong despite the recent market volatility, driven by India’s expanding retail investor base and strong long-term economic outlook.
Markets may experience short-term adjustments that temporarily dampen investor sentiment, but IPO activity is likely to remain insulated from such volatility unless there’s a prolonged downturn that lasts for a few quarters, said Munish Aggarwal, managing director and head of equity capital markets at Equirus.
This is supported by the fact that, despite a weakening global macro outlook, estimates continue to forecast average real GDP growth of around 7% for India over the next five years, translating to approximately 12% nominal GDP growth, he added. “If we can achieve that, we will continue to be the fastest-growing large economy in the world for the foreseeable future, which will drive the need for capital. An increase in capital markets activity will be a natural corollary.”
FII selloff offers an entry point
Of late, the Indian equity market has been volatile due to a mix of global and domestic factors, including the US election, rising US Treasury yields, Middle East conflicts and fluctuating oil prices. High valuations, persistent food inflation and profit-taking in large- and small-cap stocks have also affected sentiment. This volatility is reflected in domestic institutional investors buying and their foreign counterparts selling Indian equities.
Yatin Singh, head of investment banking at Emkay Global, said, “A subdued response and listing for a marquee company such as Swiggy suggests that weak FII sentiment has indeed impacted the primary market”.
Also read: It takes corporate earnings, not crowds, to sustain a stock market boom
Having said that, he thinks that the entry point for investors is now considerably more attractive than it was a few months ago. “IPOs won’t be as exorbitantly valued as they were three to four months ago. In fact, it’s a reasonably good level to enter for IPO investors, though companies with the flexibility to wait may hold off for a more favourable entry point to secure better valuations.”
Some experts cautioned, however, that investors sometimes overlook a company’s fundamentals, and whether its valuation aligns with its actual growth potential. They expressed worry that these inflated valuations may not be sustainable and could lead to more volatility or further corrections.
