December 22nd 2024.
In the bustling city of New Delhi, India, the IPO fundraising sector has hit a new high. The combination of a thriving economy, favorable market conditions, and improvements in regulatory frameworks has allowed companies to raise an impressive Rs 1.6 lakh crore in 2024. And the pipeline for the upcoming year holds even greater potential.
This impressive year not only reflects the confidence of issuers but also highlights the eagerness of investors to capitalize on listing-day gains or support companies with strong long-term growth prospects. In fact, one of the highlights of the year was Hyundai Motor India's historic IPO, which raised a record-breaking Rs 27,870 crore.
What's even more remarkable is that companies of all sizes, from large to mid to small market capitalizations, have taken advantage of the IPO route in 2024. The average issue size has also significantly increased from Rs 867 crore in 2023 to over Rs 1,700 crore in 2024. The IPO market has been buzzing with activity, with at least 15 launches in December alone.
According to V Prashant Rao, Director & Head of ECM at Anand Rathi Advisors, this fundraising momentum is the result of rising retail participation, strong domestic inflows, active participation by FPIs, an increase in private capital expenditure, and the government's focus on infrastructure and key sectors. And the market analysts predict that this momentum will continue to accelerate in the New Year, potentially surpassing the record figures of 2024.
Munish Aggarwal, Managing Director and Head of Equity Capital Markets at Equirus, estimates that based on the 75 IPO documents in various stages of approval and marketing, the issuance activity in 2025 is expected to cross Rs 2.5 lakh crore. The IPO pipeline for the upcoming year includes major offerings such as HDB Financial Services' proposed Rs 12,500 crore issue, LG Electronics India's Rs 15,000 crore public float, and Hexaware Technologies' Rs 9,950 crore offering.
In 2024, a total of 90 IPOs were launched, collectively raising Rs 1.6 lakh crore, including eight IPOs scheduled to conclude on December 23-24. Additionally, the IPO of Unimech Aerospace and Manufacturing, worth Rs 500 crore, is set to open on December 23. Vodafone Idea also raised Rs 18,000 crore through a follow-on public offer.
The amount raised in 2024 far exceeded the Rs 49,436 crore raised by 57 companies through IPOs in 2023. And compared to the previous year, 2021 saw an even more impressive IPO activity, with 63 companies raising Rs 1.2 lakh crore, making it the best IPO year in two decades. This was driven by abundant liquidity, increased retail investor participation, and the sustained excitement in the primary market.
The SME segment has also seen a surge in activity, with a record 238 small and medium enterprises raising Rs 8,700 crore, almost double the amount raised in 2023. This reflects the increasing interest in SME public offerings, but it also comes with higher risks for retail investors. In response, Sebi has introduced stricter regulatory frameworks, including profitability requirements, a cap on the offer-for-sale component, and a "draw of lots" system for non-institutional investors, to protect smaller investors.
Experts attribute the robust IPO activity this year to a stable economic environment, policy continuity at the central government level, and broad-based economic growth. Pranjal Srivastava, Partner-Investment Banking at Centrum Capital, believes that the stable economic environment, policy continuity, and broad-based growth have encouraged companies and investors to raise funds. Foreign portfolio investors have also been major buyers, especially in larger IPOs.
Private equity exits, sponsor-driven sales, and shifts in corporate funding strategies have also contributed to the IPO activity. Neha Agrawal, MD & Head of Equity Capital Markets at JM Financial Institutional Securities, points out that the resurgence of manufacturing and increased private capital expenditure are key factors as companies look to fund expansion and modernization. Many businesses are also diversifying their funding sources by shifting from debt-heavy models to equity, resulting in stronger balance sheets and reduced leverage.
The year's largest main-board IPOs included Hyundai Motor India, Swiggy, NTPC Green Energy, Bajaj Housing Finance, and Ola Electric Mobility. In contrast, Vibhor Steel Tubes had the smallest IPO, raising only Rs 72 crore, showcasing the diversity of companies accessing the capital markets. Going public provides companies with crucial funds for expansion, working capital, and debt repayment, while also increasing visibility and attracting new business opportunities. It also serves as an exit strategy for long-term investors.
What's even more impressive is the high IPO subscription ratios this year. Vibhor Steel Tubes had an impressive subscription of 320 times, while other offerings such as KRN Heat Exchanger and Refrigeration, Manba Finance, and Gala Precision Engineering were each subscribed over 200 times. Additionally, IPOs of companies like One Mobikwik Systems, Unicommerce eSolutions, Diffusion Engineers, BLS E-Services, and Exicom Tele-Systems were subscribed more than 100 times.
This strong demand translated into significant listing gains, with over 60 companies delivering positive returns on their debut day. Vibhor Steel Tubes, BLS E-Services, Bajaj Housing Finance, and KRN Heat Exchanger had gains of more than 100%, showcasing the robust investor demand. Meanwhile, India's equity markets also saw record-breaking performances, with the NSE Nifty 50 reaching an all-time high of 26,216 points on September 27 and the BSE Sensex peaking at 85,836 points on September 26, supported by the country's strong economic growth outlook.
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