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Below th Quote on Indian IPO Landscape in 2023: A Review and Future Outloo By Mr. Vivek Goel, Managing Partner, Tailwind Capital Advisors

In the ever-evolving world of IPOs, the year 2023 has been a tale of two halves. The primary markets experienced a dry and slow first six months, only to witness a significant surge in new stocks going public in the latter part of the year. There have been 46 IPOs in 2023, raising a cumulative Rs 41095.36 crore. This marks a 30 percent decline from Rs 59301.7 crore raised through 40 IPOs in 2022.

The record-breaking blockbuster year of 2021, with 63 IPOs raising a whopping Rs 1,18,723.17 crore, set a high benchmark. In comparison, 2023 falls short, with regulatory developments and economic factors influencing the market dynamics.

India emerged as the global leader in the number of IPOs year-to-date in 2023. The July-September period of 2023 saw a staggering 21 IPOs in the Indian main market, compared to just four in the same quarter of 2022. The three largest IPOs in Q3 in terms of proceeds were RR Kable, Concord Biotech, and SAMHI Hotels, with key sectors contributing to this surge including diversified industrial products, consumer products and retail, and technology. While the most subscribed IPO for the year has been in Tata Technologies seeing applications of over Rs 1 lakh crores.

SME IPOs in India also recorded impressive listings. In fact, many SME IPOs in 2023 have significantly been oversubscribed, demonstrating strong investor appetite bolstered by strong after-listing performances of over 150 companies trading at a premium of range of 20 (109 companies) to 100% (59 Companies). Total of 181 SME IPOs have been able to raise over 4,643 crore rupees this year. We are expecting this boom to continue next year with the upcoming elections keeping markets optimistic. 

As India aims to become a $5 trillion economy, SMEs and startups will play a pivotal role given their significant economic contribution. Equity investments in Indian SMEs present a major opportunity to help meet this growing credit need. Private equity firms are well-positioned to capitalize on this opportunity by financing innovation, job creation, and scaling among emerging SMEs and startups. The rise of fintechs and the growing digital lending market, expected to reach $515 billion by 2030, have enabled improved financial access for underserved customers like SMEs. PE firms have invested $17.8 billion in Indian fintechs between 2019-2023 to support SME and startup growth through innovative solutions. By aiding SMEs’ digital transformation, PE investors are driving value creation. 

Driving Forces and Momentum for 2024

As 2024 dawns, India boasts a market capitalization surpassing $4 trillion in 2023, securing the global fourth position behind the U.S., China, and Japan. The nation records a 22.4% YoY surge in registered investors, reaching 8.49 crore, driven by positive market sentiments, accessible online trading platforms and social media awareness.  Bihar, UP, and MP witnessed significant surges in new investors, with Bihar leading at 36.6%, followed by UP (33.8%) and MP (28.9%), as per National Stock Exchange data. Maharashtra boasts the largest investor pool with a 16.9% increase, totaling over 1.48 crore registered investors. Northeastern states, particularly Mizoram, Nagaland, and Tripura, also experienced notable growth, promising a robust outlook for fundraising activities in 2024. India's rising population of retail investors significantly contributed to the domestic market's resilience, countering foreign investors' selling pressure observed before November 2023.

The IPO landscape is currently witnessing a surge in activity driven by an urge to tap the capital markets pre- or post-Indian general elections, coupled with strong economic activity and positive investor sentiment. This momentum is expected to continue well into the second half of 2024. To capitalize on this growth, businesses must prioritize transparency, robust governance, and innovation in their business models.

Regulatory developments in 2023 aimed at enhancing disclosures and market practices, including the introduction of the T+3 mechanism for IPOs, have added a layer of efficiency to the process. This voluntary measure is set to become mandatory from December 2023.

Issuers from traditional sectors took the lead in listing, receiving significant investor interest. While not billion-dollar deals, these issuers paved the way for a potential revival of the IPO market in 2024, potentially hosting larger deals.

What’s in the Pipeline for 2024?

As the country gears up for general elections in May 2024, promoters and bankers are aiming to expedite their stock market listings, anticipating volatility during the voting period. The uncertainty surrounding economic and business policy continuation, especially if a new political party comes to power, adds urgency to the listing plans.

The IPO pipeline for 2024 appears robust, with a mix of new-age companies and those from traditional sectors. The positive market sentiment towards issuers with solid fundamentals, demonstrated by the last round of listings in 2023, is expected to gather momentum and carry into 2024.

While a temporary lull in the months leading to the general elections might be anticipated, investors are likely to resume interest post the elections, marking a potential uptick in IPO activity.

Challenges and Preparations

Despite a positive outlook, we must remain agile and prepared for uncertainties. Factors such as geo-political challenges, commodity market stability, and the beginning of the rate cut cycle by Central Banks globally are expected to boost the global market. However, one should be ready to adapt, ensuring realistic valuations, the adoption of innovative models, sufficient working capital, and a healthy balance sheet to maintain profitability. The wait-and-watch approach ahead of the elections in India might result in a temporary slowdown, but a pickup is expected post the electoral uncertainties. Firms that proactively address these challenges and embrace a strategic approach will be well-positioned to make their mark in the dynamic IPO market of 2024.

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