IPO momentum seen growing on prospects of political stability

MUMBAI: Hopes of policy stability in India after victories for Prime Minister Narendra Modi's ruling party in key state polls this month should extend a boom in initial public offerings (IPO) into 2024 as companies rush to tap investor demand, bankers say.

The $6.8 billion raised by Indian IPOs so far this year is 16% less than in all of 2022, Dealogic data shows, but outperforms a plunge of 36%, to about $5 billion, in Hong Kong listings, which are set for their weakest year in two decades.

The victory of Bharatiya Janata Party (BJP) in three of four major Indian states gives it a boost ahead of general elections due by May, and expectations of stability will spur more fundraising in 2024, bankers said.

"The state election outcome was more positive than expected, and has given investors more conviction leading up to the final elections, boosting confidence," said Subhrajit Roy, India head of global capital markets for Bank of America.

At least five companies plan to raise $500 million each, or more, in India listings next year, including three backed by SoftBank - Ola Electric, retailer FirstCry, and food delivery firm Swiggy.

More than a dozen others, from lenders to drugmakers and technology firms, have hastened preparation work on IPOs after the state poll results, bankers say, without identifying them.

"Issuers are stepping up the pace on their listing timeline to tap the current market sentiment," said Mahesh Natarajan, Nomura India head of equity capital markets. "The number of deals in the pipeline has multiplied as compared to last year."

India's market benchmark Sensex is up nearly 17% this year and stands at a record, after having risen for seven straight weeks until last week, in its longest winning run since January 2018.

India's market share of IPO volumes has also grown this year amid economic slowdown and geopolitical concerns in China and a slump in US listings.

India's share of global IPO proceeds is at an all-time high of 5.98%, Dealogic says, almost doubling in two years, while its share of Asia IPO proceeds has also grown to 9.9% this year from 5.9% in 2018.

RECORD YEAR
The year's major new Indian listings included Mankind Pharma , which raised $500 million in May, the same month that saw Nexus Malls raise $400 million, while Tata Technologies raised $360 million in November.

The fundraising activity has also been boosted by domestic growth that has beaten estimates, along with upward revisions of economists' projections, making the country a rare bright spot for global investors.

"India's relevance to the world is ever-increasing, as one among the few economies continuing to outperform against a global slowdown," Nomura's Natarajan said.

Other IPO hopefuls in 2024 include Warburg Pincus-backed India First Life Insurance, which is eyeing a January listing, while National Securities Depository Ltd is targeting a listing in the first quarter, two sources with direct knowledge said.

Both companies, which received regulatory approval for their IPOs more than six months ago, did not respond to queries seeking comment.

Top bankers are seeing multiple pitches every week, and expect the momentum to continue into 2024.

"This is the most momentum we have seen in at least 18 months ... all the signs are there for a record year (in 2024). India's bullishness seems given today," Bank of America's Roy said.