India's IPO Momentum Since 2021, the Indian primary markets have seen around 200 mainboard IPOs
By Anand Rathi
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In recent years, India has emerged as a thriving hub for initial public offerings
-(IPOs). Since 2021, the Indian primary markets have seen around 200 mainboard IPOs.
In 2021, there were 63 IPOs worth around 1,20,000 crores, setting a new record. In 2022, 40 IPOs raised approximately 60,000 crores. In 2023, 58 IPOs raised around INR 44,000 crores. As of mid-July 2024, over 35 IPOs have raised over INR 30,000 crore. Between CY21 and CY24, 466 IPOs in the SME segment raised INR 11,556 crores, highlighting their importance of the MSME sector.
CAUSE OF THE IPO BOOM
There is a strong positive correlation between secondary equity market performance and primary equity capital raises. At the same time, macroeconomic and corpo rate fundamentals drive secondary market performance.
GOVERNMENTAL INITIATIVES AND REGULATORY SUPPORT
The Indian government's proactive initiatives to promote local businesses and programs like "Make in India" and Production-linked Incentive (PLI) schemes and improve the ease of doing business have been a major driver of this surge in IPO activity. Furthermore, the government's push for privatization, including the disinvestment of Public Sector Undertakings (PSUs), has created new business opportunities.
Between FY21 and FY24, DIPAM disinvested around INR 1,00,000
crores and set a target of INR 50,000 crores for FY25.
INVESTOR CONFIDENCE AND MARKET PARTICIPATION
Investor confidence has risen dramatically and Mutual funds' average assets under management (AAUM) increased by around 30%. FY24, mutual funds'
AUM increased by nearly 36% from INR 40 lakh crores in FY23 to INR 53.40 lakh crores. This significant increase reflects growing confidence and participation in the market. SIP contributions to mutual funds increased by 28% in FY24, indicating increased participation from retail inves-tors. This year, while Foreign Institutional Investors (FII) were net sellers, Domestic Institutional Investors (DIl) infused approximately INR 2.37 lakh crores into the markets.
SECTORAL GROWTH AND CAPEX
Because of the increased need for capex, companies in certain industries have raised capital through IPOs. Among these, the industrial, financial services, healthcare, and consumer discre-tionary sectors have grown sig-nificantly accounting for roughly 70% of all IPOs between CY21 and
CY24.
WEALTH GENERATION AND MARKET DYNAMICS
Primary market size and subscription have grown because of increased investor appetite and companies' need for more capex.
An IPO allows to raise capital while allowing promoters, early investors, and employees to realize the value of their investments.
CONCLUSION
The momentum in primary markets demonstrates the country's dynamic and resilient economy. Primary markets continue to thrive, providing companies with risk capital and scope for innovation and this upward trend is expected to continue, strengthening India's position as a top investment destination.
