What a difference a day makes.
Tuesday started with exit polls predicting that the current government would return with a huge majority; on Wednesday we were in the reality of a BJP-led coalition government. But either way, the economy will stay strong, analysts say. “The Indian economy is on course to more than double in size over the next decade,” economist Shilan Shah notes.
And despite the many challenges in 2024 – the Red Sea crisis, dollar appreciation, FII sell-off etc – India's stock markets have also been remarkably resilient. 374 stocks surpassed analyst estimates of earnings per share in FY24.
The upbeat mood and strong earnings performance have fueled an IPO surge. The optimism comes after a sluggish 2022 and 2023.
28 companies debuted on the Indian bourses upto May 15 this year, compared to just seven in the same period last year. The trend is likely to continue, with big names like Hyundai, Ola Cabs, FirstCry, NSDL, and Tata Capital coming up.
So, let's explore the performance of the newly listed companies. Will the momentum continue?
In this week's Analyticks,
- A bullish season for IPOs: Companies are queuing up to list in Indian markets
- IPO dashboard: 2024's most successful IPOs (so far)
Let's jump in,
Indian IPOs are gaining momentum after a muted two years
2021 was a landmark year for Indian IPOs. Low interest rates and frothy valuations triggered listings for as many as 65 companies. Their combined issue size crossed Rs. 1.2 trillion. Start-ups like Paytm, Zomato, MapmyIndia and Nykaa went public. One 97 Communications, Paytm’s parent company, became the year's biggest IPO.
The euphoria dampened a bit in 2022 due to the Russia-Ukraine war. The tepid response continued in 2023. While the number of listings increased by 40%, total issue size declined by more than 10%.
Despite this, Delhivery, Adani Wilmar, Mankind Pharma and Tata Technologies together mobilised more than Rs. 16,000 crore in those two years. The undisputed champion of the Indian IPO market – LIC of India – also hit the exchanges in 2022, with an eye-watering issue size of Rs. 21,000 crore.
2024: the year Indian IPOs are making a comeback
We can sense a change in the mood as we enter 2024. IPO transactions and size have both jumped. The combined issue size has already surpassed half the total amount raised last year.
IPO issue sizes have zoomed up, as companies sense that stock markets have the appetite for larger listings.
Among 2024 issues, Bharti Hexacom and Aadhar Housing Finance are the top performers to date. We see healthcare followed by financials dominating this year so far with four and three listings, respectively.
An increase in retail participation has led to a jump in average IPO subscriptions, from 43x in 2023 to 56x in 2024. Mutual funds have also emerged as key investors in these capital issues, reports Bloomberg.
Markets have been picky in rewarding IPOs
Markets have been strong but picky in rewarding new listings. Of 28 IPOs, one-third of companies (nine, to be exact) registered negative listing gains like JG Chemicals (-16%) and Jana Small Finance Bank (-11%). Only two companies, Vibhor Steel Tubes (+196%) and BLS E-Services (+171%) recorded triple-digit bumper listings.
This trend mirrors the pre-pandemic behaviour of 2019. This suggest that the recent interest in listings with frothy valuations has subsided.
IPO Activity has been muted globally
The global market presents a contrasting picture to India’s. The Russia-Ukraine war hit market sentiment and continues to be a big drag. IPO transactions fell dramatically after the war broke out in Jan-March 2022, as can be seen in the figure below.
Even two years after the Russia-Ukraine war that began in February 2022, the global IPO market sentiment remains subdued. The number of transactions is down to less than 300 with its value below $25 billion. However, if we compare Q1 2023 with Q1 2024, we can see a slight increase in the average size.
An EY report strikes an optimistic note. It points to stable valuations and pricing levels in the US, ASEAN, and Indian markets compared to the previous year, and an upward trend in Japan, Europe, and the Middle East. “Despite restrained market activity in previous years, there’s new enthusiasm from both IPO issuers and investors," the analysts note.
India's IPO lineup is set to double in FY25
Analysts anticipate a robust IPO market for India this year, with new listings likely to double in FY25 compared to FY24. There is a strong pipeline of companies planning their public debuts in the coming months.
According to Prime Database, 40 companies have filed their offer documents with SEBI. Their combined issue size is Rs. 53,515 crore (more than $6 billion). As of 10th May, 19 companies have received the green light.
India’s resilience and optimism around IPOs stands out in the current global environment. Experts believe that Hyundai’s listing can prod other MNCs to list their India operations. It has already tickled the top minds in Korean electronics company LG, if reports are to be believed.
With several high-profile IPOs in the queue, India is a shiny spot in the global IPO market right now.
IPO Dashboard: The biggest IPOs posted listing gains in 2024
Nine out of ten of the biggest IPOs in 2024 saw listing gain
With the Nifty 50 index rising 1.4% in 2024 (accounting for Nifty 50’s 5.9% decline on Tuesday with election results), India’s markets remain conducive to IPOs. This week, we check Trendlyne’s IPO dashboard to see how the Indian market has treated new public offerings in the stock market.
31 mainline IPOs have been released so far in the year. Major IPOs with large issue size that went public in 2024 are Bharti Hexacom, Aadhar Housing Finance, Go Digit General Insurance, Bharat Highways InviT, Indegene, Juniper Hotels, Entero Healthcare Solutions, TBO Tek, Medi Assist Healthcare Services and Jyoti CNC Auto. Out of these major IPOs, only Entero Healthcare Solutions posted an 8.6% listing loss.
Bharti Hexacom, an arm of Bharti Airtel, is the largest IPO with an issue size of Rs 4,275 crore, which went live on April 12. This telecom services company offers consumer mobile services, fixed-line telephone, and broadband services in Rajasthan and North East India. The IPO posted a listing gain of 42.7% and was subscribed for 29.9x of the available shares. The stock rose by 27.5% post listing, taking its current gains since listing to 68.5% on the back of a 7.9% YoY and 10.3% YoY growth in its revenue and net profit in Q4FY24.
TBO Tek also features in the list with the highest listing gains of 52.9% after listing on May 15. This travel support services company is a travel distribution platform in the global travel and tourism industry. It filed for an IPO for investments in technology data solutions, sales, marketing, and infrastructure with an issue size of Rs 1,551 crore and was subscribed for 86.7x of the available shares. The IPO, however, declined by 3.9% since its listing leading to a lower current gain of 48.9%.
The 2024 list of best and worst performing IPOs is here.
