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Resilience fuels fundraising momentum!

A blockbuster year – multiple sectors jump on the IPO bandwagon

* The Indian IPO market has experienced an impressive year, with equity issuances across various categories increasing by ~2.6x compared to the previous year. This remarkable growth can largely be attributed to the evolving nature of Indian equities, which are introducing new dimensions in the investment landscape, accompanied by robust fund inflows.

* In CY24, the Indian markets demonstrated remarkable resilience and strength amid weak global macros, high interest rates, and geopolitical uncertainties that kept global markets volatile and jittery. The benchmark index (Nifty-50) surpassed the milestone of 26k in Sep’24, reflecting ~12% rise in CY24YTD (vs. 20% increase in CY23).

* The past 12 months have witnessed IPOs from companies across a diverse range of sectors, rather than being limited to a select few or emerging sectors, as has been the case in previous years. This diversification is, in our opinion, a positive indicator for the Indian capital markets, as it provides investors with various opportunities to engage with India's growth narrative.

* In this report, we conduct a comprehensive analysis of this year’s issuances as well as the trends observed over the past decade.

Highest-ever fundraising through IPOs

* CY24 has been a blockbuster year for the Indian primary market, with INR1.8t raised through more than 317 IPOs to date – an all-time high that surpasses the previous record of INR1.3t set in CY21 and far exceeds last year's total of INR576b.

* The contribution of new listings through IPOs to the Indian market capitalization witnessed an uptick of 2.9% vs. 1.4% in CY23. However, it still lags far behind the highs recorded in CY17 (+3.7%) and CY21 (+3.4%).

* During CY24, 81 of 317 IPOs were on the main board, while 236 IPOs happened through SMEs. The capital raised through SME IPOs amounted to INR92b vs. INR49b collected in the previous year. Notably, the contribution of SMEs to total IPOs was low at 5.3% in CY24, compared to 8.6% in CY23.

* We categorized the stocks based on market capitalization into large-cap, mid-cap, and small-cap segments for the capital raised through IPOs(above INR85k – largecap; INR25-85k – mid-cap; below INR25k – small-cap companies). Notably, the capital raised by large-cap companies amounted to INR601b (34% of total; raised by just five companies); mid-cap companies raised INR490b (28%, from nine companies), and small-cap companies raised INR666b (38%, from 303 companies).

* The year marked the largest IPO in India, with Hyundai Motor issuing shares worth INR278.6b in Oct’24. This surpassed the previous record set by LIC, which raised INR205.6b in May’22, followed by One 97 Communications with INR183b in Nov’21, and Coal India, which raised INR152b way back in Oct’10. Further, the year also saw the largest FPO ever, with Vodafone Idea raising INR180b in Apr’24. This was preceded by Yes Bank's FPO of INR150b in Jul’20 and ONGC's issue of INR106.9b back in Mar’04.

* Interestingly, the IPOs were not concentrated but were instead spread across a broad spectrum of sectors, with companies from 23 different sectors raising funds through IPOs this year.

* Over the years, the sectoral representation of new offerings has experienced a significant transformation in alignment with changes in the underlying economy.

* New sectors have emerged, while some of the previously dominant sectors have diminished in relative importance in new India. We present a detailed overview of the 10-year issuance in Exhibit 17.

* Automobiles, Telecom, Retail, Capital Goods, and e-Commerce sectors dominated CY24 in terms of new listings, accounting for 59% of the total issue size from 83 companies. Conversely, 90% of the issuances were concentrated in just three sectors in CY20 – BFSI, Healthcare, and Real Estate. CY21 was mostly driven by E-Commerce, while CY16 and CY17 were dominated by Insurance.

* In total, 43% of the funds raised through new offerings were attributed to just five companies – Hyundai Motor (INR278.6b), Vodafone Idea (INR180b), Swiggy (INR113.3b), NTPC Green (INR100b), and Vishal Mega Mart (INR80b).

IPO oversubscription at ~26.6x during CY24YTD

* On an aggregate basis, IPOs have been oversubscribed by ~26.6x, attracting a subscription of INR46.7t vs. the offer size of INR1.8t. Notably, this ratio is the second highest in the decade, trailing only the high attained in CY23 (at 29.9%).

* Notably, main-board IPOs experienced an oversubscription of 18.9x vs. SME oversubscription of 165.3x. In addition, large-cap, mid-cap, and small-caps witnessed an oversubscription of 11.4x, 14.9x, and 48.8x, respectively.

* Sectors that experienced significant subscription levels against their offer sizes included Capital Goods (INR9,004b vs. offer size of INR149b), NBFCs (INR5,660b vs. offer size of INR110b), Healthcare (INR4,732b vs. offer size of INR103b), Retail (INR3,371b vs. offer size of INR165b), E-commerce (INR3,076b vs. offer size of INR144b), and Metals (INR2,394b vs. offer size of INR26b – refer to Exhibit 5.

* 151 IPOs received an overwhelming response, with more than 100x oversubscription, of which 141 were from the SME space.

* Of the top 20 companies by size, five experienced a response of more than 50x oversubscription, while two witnessed a response of less than 2x.

The Sparks and the Blips of the IPO juggernaut

* Among the 78 main-board IPOslisted so far, 54 (69%) are trading at a premium to their offer prices, with 11 of them trading at a premium of over 100% from their offer prices.

* Of the top 20 companies by issue size, 16 are trading above their offer prices. Premier Energies leads with a remarkable increase of 194% from its offer price, followed by Bharti Hexacom (+155%), Waaree Energies (+106%), Bajaj Housing (+84%), and Swiggy (+50%).

* Within top 20, the leading debut performers were Bajaj Housing (+136%), Premier Energies (+87%), Waaree Energies (+55%), Brainbees Solutions (+46%), and Bharti Hexacom (+43%).

* Notably, only three companies in the top 20 – ACME Solar (-12%), Hyundai Motor (-7%), and Sagility India (-2%) – have debuted with a decline from their offer prices.

* Four of the 78 main-board IPOs debuted with a premium of more than 100%, while 18 debuted with a discount to their offer prices.

* Conversely, 28 of 231 SME IPOs debuted with a premium exceeding 100%, while 22 debuted at a discount to their offer prices.

* SME IPOs have outperformed since their listing. The aggregate market capitalization of all SMEs has increased by 31% from the listing day, while MainBoards have risen by 10%. Similarly, small-cap stocks have outperformed, rising by 15% since their listing, compared to large-cap and mid-cap stocks, which have increased by 6% and 14%, respectively.

* Sector wise, 70% of the sectors are trading above their listing day prices. Consumer Durables (+77%), Logistics (+57%), Capital Goods(+51%), Chemicals (+35%), and Metals (+32%) are the top performers. In contrast, Oil & Gas (-29%), NBFCs (-17%), Hotels(-9%), Retail (-8%), and Private Banks(-6%) are the key laggards.

QIPs showing a healthy pickup; funds raised via QIPs at an all-time high

* QIPs have surged, with capital raised through 91 QIPs reaching a record high of INR1,292b (2.5x of CY23) so far this year (previous year: 43 QIPs). This figure has surpassed the previous year's total of INR523b, and marks the highest amount to date, exceeding the previous peak of INR805b in CY20.

* The year was dominated by the Real Estate, Utilities, Automobiles, Metals, and PSU Banks sectors, which collectively accounted for 57% of the total QIP issuances thus far.

* The top 10 companies contributed 49% (INR630b) of the total QIP raised so far in CY24YTD. The leading issuances for CY24YTD include: Vedanta (INR85b), Zomato (INR85b), Adani Energy Solution (INR84b), Varun Beverages (INR75b), Godrej Properties (INR60b), PNB (INR50b), Prestige Estates (INR50b), JSW Energy (INR50b), Samvardhana Motherson (INR49b), and Adani Enterprises (INR42b).

* Of the 91 issues, six have delivered returns exceeding 100% over their issue prices. The top performers were Shakti Pumps (+380%), Wockhardt (+186%), Anant Raj (+171%), eMudhra (+133%), and Ganesha Ecosphere (+127%).

* More than two-thirds of the stocks have delivered positive returns against their issue prices.

* Currently, 26 stocks are trading at a discount to their issue prices. The top underperformers include: Vikas Lifecare (-32%), Valor Estate (-30%), Zodiac Energy (-18%), Adani Energy (-17%), and Jupiter Wagons (-17%).

About 71% of the OFS accounted for by private owned enterprises

* Offers for Sale (OFS), which indicate a dilution of promoters’ holdings, have jumped to INR304b in CY24YTD from INR189b last year. This surge was mainly led by a stake sale valued at INR215b (~71% of the overall amount) by private firms.

* The largest OFS was that of GE Vernova T&D (INR89.2b), followed by Hindustan Zinc (INR68.5b), GIC of India (INR25.5b), NHPC (INR23.2b), and NLC India (INR20.6b).

* Of the 23 issues, 16 have delivered positive returns against their issue prices.

* Among the top 10 issues by size, eight have delivered positive returns, while two is trading at a discount to its issue price.

* The leading positive performers include: Velan Hotels (+159%), Diamond Power (+91%), Aditya Birla Sun Life AMC (+85%), Sical Logistics (+50%), and GE Vernova T&D (+40%). Conversely, stocks trading at a discount to their issue prices are: Dhatre Udyog (-40%), Sanghi Industries (-15%), Route Mobile (-13%), Andhra Cements (-7%), Bartronics India (-6%), Equippp Social (-3%), and Hindustan Zinc (-1%).

Expect the equity issuance momentum to sustain

* We expect the fundraising momentum to continue moving forward, as India possesses a remarkably resilient macroeconomic landscape that has withstood various challenges.

* The blazing growth of Indian markets, along with wider participation from multiple sectors and smaller companies, as well as a wave of new issuances across sectors, has effectively quelled the traditional concerns about market size, depth, and diversity. This evolution has paved the way for diverse investment opportunities across the market spectrum and its sub-sectors.

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