IPO rally stays the course with Rs 60,000-cr share sales lined up for new year

The IPO frenzy shows no signs of easing as share sales worth about Rs 60,000 crore are lined up in 2024.

It's been a dream run on D-Street. As 2023 nears its end, the market rally has not only attracted a record number of retail investors to equities, but also triggered a rush among promoters to take their companies public.

The number of mainboard IPOs that hit the market in 2023 was the second highest in over 10 years. But the rush to go public looks far from over as the Street is set to enter the new year with about Rs 60,000 crore of share sale lined up.

Analysts believe this exuberance is likely to stay on, for now, on the back of robust economic growth, ample liquidity, anticipated rate cuts from global central banks, and expected continuity of the current regime beyond the Lok Sabha elections next year.

In 2023, some 57 Indian companies raised around Rs 49,000 crore through mainboard IPOs, as per data from Prime Database. And, 27 companies have already obtained the green light from the market regulator to float their public issues to raise around Rs 29,000 crore. Another 29 companies are awaiting the regulatory approval, involving a cumulative fundraise of about Rs 34,000 crore.

In 2023, nearly 80 firms filed the draft red herring prospectuses (DRHPs) with the Securities and Exchange Board of India (Sebi), a dip from the previous two years.

However, market participants are eagerly waiting for some high-profile names enter the primary market in the new year such as Ola Electric, Swiggy and FirstCry. According to news reports, these three companies are expected to raise $500 million (about Rs 4,000 crore) each.

Analysts anticipate a market boost in the first half of 2024, expecting rate cuts from both the US Federal Reserve and the Reserve Bank of India (RBI). This, coupled with the expected BJP victory in the general elections in May, will provide further legs to the current rally, they added.

"IPO activity has been robust this year and the momentum is expected to continue into 2024. There is eagerness among investors to tap capital markets ahead of the general elections. This seems a prudent strategy as well given that historically, Indian equities have usually done well heading into general elections", said Mohit Ralhan, CEO, TIW Capital.

In December 2023, amid the ongoing rise in local equity markets, 11 companies raised approximately Rs 8,256 crore through share sales via IPOs. The benchmark Sensex and Nifty have surged nearly 15 percent each in 2023, with BSE midcap and smallcap indices jumping around 45 percent and 50 percent.

Some of the highly anticipated IPOs expected in 2024 include Ebixcash, Tata Play, Indegene, Oravel Stays (OYO), Go Digit General Insurance, and TBO Tek.

Experts said with better investor sentiment, PE/VC funds are more active, and are looking to monetise assets. With this prevalent bullish sentiment, they're inclined to seek exits through IPOs or through bulk deals.

Analysts further said traditional sectors such as manufacturing and financial services will sustain strong IPO activity in the new year. Manufacturing firms are the flavour of the season, benefiting from India's increasing capital expenditure and a slowdown in industrial activity in China, they added.

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