Consumer tech, EV startups likely to take lead in launching IPOs in 2024, says Kaushal Shah of Kotak

Kaushal Shah is the Managing Director & Head ECM at Kotak Investment Banking

Kaushal Shah, managing director & head ECM, Kotak Investment Banking, expects 2024 to be even busier for the primary market that the year gone by during which at least 54 initial public offerings (IPOs) were launched.

A diversified set of sectors will tap the market to raise funds as India’s fundamentals remain robust amid political stability and improving interest rate scenario, says Shah, who has over 20 years of experience in investment banking.

In an interview to Moneycontrol, Shah says starups in consumer tech, electric vehicles and digital tech will launch their offers as they achieve profitability.  Edited excerpts:

How was the year 2023 for the primary market?

The year 2023 was that of small and midcap IPOs. Of the total 54 IPOs that got done, more than 70 percent were for an issue size of less than Rs 1,000 crore and more than 85 percent were for market capitalisation of less than Rs 10,000 crore.

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Kaushal Shah

Managing Director & Head ECM|Kotak Investment Banking

Domestic institutional Investors (DIIs) continued to be instrumental in the success of the IPOs, driving not only demand but also the pricing of IPOs. If we consider IPOs > $100 million/ Rs 800 crore, more than two-thirds of the anchor demand has been driven by DIIs.

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This year highlighted the depth of capital markets where multiple IPOs that got launched around the same time also got heavily subscribed across different category of investors. For instance, in November 2023, five IPOs got launched in one week and against a fund raise of around Rs 7,400 crore, there was an institutional demand of more than Rs 1,80,000 crore and non-institutional demand of more than Rs 70,000 crore.

The proportion of primary fund raise in 2023 was almost 50 percent against much lesser proportion in previous years, highlighting more funds going into growth or capex or debt reduction among others.

Will the fund raising via IPOs in the mainboard and SME segments be higher in 2024 than in the previous year?

There were no IPOs in January and February and only around 16 percent of the IPOs in first six months. However last four months saw 34 IPOs, which meant almost nine IPOs per month on an average. We expect the momentum not only to continue but improve, as India's fundamentals remain robust, political scenario is stable, interest rate scenario is improving globally and geopolitical issues have already been factored in.

We believe that the market momentum will allow larger companies with larger IPO sizes to hit the market in addition to small and midcap IPOs.

Which are the expected IPOs in the year 2024?

There are more than 55 IPOs where DRHPs has been filed and are at different stages of regulatory approvals and marketing.

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Which are the sectors likely to dominate the primary market in 2024?

IPOs in 2023 were well diversified across sectors like pharma, FIG (financial institutions group), real estate, auto and industrials, infrastructure and consumers, unlike in previous years where financial services or new-age sector dominated in certain periods.

In 2024, we are expected to see IPOs across a diversified set of sectors. However, new-age companies like consumer tech, EV players and digital tech companies among others are likely to come back meaningfully as they achieve profitability and more robust unit economics.

What is your advise to retail investors who enthusiastic about mainboard IPOs?

IPOs in 2023 have given strong returns, especially on the back of reasonable pricing and supportive market scenario. For example, IPOs greater than Rs 500 crore have given more than 30 percent listing gains. Having said that, a company's performance and sound fundamentals are of paramount importance and should form the basis of decision-making.

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