Amidst global uncertainties, institutional investors are still sitting on larger cash piles as percentage of their assets under management, says Ganeshan Murugaiyan, Head of Corporate Coverage and Advisory, BNP Paribas India. Speaking exclusively to Moneycontrol, he expressed confidence that India will continue to remain a buoyant IPO market, though the public issues this year may not close at levels similar to what the market witnessed in 2024. Pricing the IPOs right will be the key he affirmed. Edited excerpts:
We’ve not seen too many blockbuster IPOs yet. It's been slightly dull compared to 2024. How do you see the year close?
Last year, the volume of equity deals in India including IPOs reached a record $70 billion of which IPOs made up around $19 billion, the highest ever in two decades. The IPO volumes in CY24 were significantly boosted by mega listings in the second half, such as Hyundai Motor (USD3.3bn), Swiggy (USD1.3bn) and NTPC Green (USD1.2bn). The average deal size in 2024 was $275 million (IPO size ≥ USD 50m) with over 10 IPOs greater than $500 million size.
In 2025, there are several deals in the IPO pipeline which are in the range of USD1 – 2 billion. But whether 2025 would continue to be as promising for the IPO market depends on a host of factors. If we look at the 2025 year-to-date, the average deal size continues to be in the similar range as 2024 at USD 260 million.
Structurally, we believe the long-term growth of India is intact but the Indian equity markets have to be supportive for an IPO boom, which is dependent not only on domestic factors but also global cues. We expect the IPO volumes in 2025 to close better than 2023 and we believe that the IPO volumes will continue to grow in the next five years as India is on course to become USD 5 trillion economy by 2027.
There are a few large names from the startup space waiting to hit the market. You expect those listings to happen this year?
Indian equity markets have been volatile due to global macro headwinds. A strong domestic story is playing out in India, with domestic institutional investors (DIIs) infusing over USD 50 bn in the market and has remained a strong pillar of support. The FPIs flows, this year, has been muted. The ongoing uncertainties caused by geopolitical factors, trade and tariff volatility coupled with cautious corporate earnings guidance is weighing on the India markets. There is a decent amount of funds flow in the market, but everyone is waiting and watching before deployment. We believe that it is buyer’s market and investors have become more discerning on new fund deployment. Hence the deals will have to be priced in at the right valuation. IPOs targeting aggressive valuation will face resistance from investors in these volatile market conditions.
With tariffs imposed by the US, will that change the dynamics of how investors look at Indian markets, both from an IPO and fresh investment perspective?
The impact of Tariffs has to be evaluated at an entity level in terms of its impact on the profits and valuations at which they trade. The impact of tariffs on some of the larger companies and corporate groups will be limited from a profit standpoint. Based on our evaluation, US tariffs do not have a meaningful impact on the Nifty 50 companies’ earnings. However, it is negative sentiment for foreign investors. Investors are looking forward to a resolution of the tariff issue in the coming months.
One of the reasons for incremental money to flow into India was because the China plus one theory. Has that thesis played out well?
Diversification of manufacturing and supply chains by reducing dependence on a single market has become a business imperative in today’s times. Whether you call it China plus one or any other strategy, all companies are looking to diversify their supply base. From that perspective, India is still under invested for a lot of multinationals compared to other markets hence we see tremendous potential for India in this area. Thematically, we are seeing continued focus of investment into India both by India Inc and multinational corporates.
Should we expect more outbound M&A transactions after the Tata Motors deal?
Indian balance sheets are looking stronger and reasonable target valuations are making it attractive for Indian groups to make strategic moves through cross border M&A.
Outbound M&A activity continues to be active in pharma, IT and industrial space. Acquisitions over the past few years have been strategic in nature; it is no longer about acquiring only to expand the presence outside of India. Indian companies are looking to add capabilities and geographies which are strategic for their expansion plans.
Do you see an imminent challenge to liquidity, given that FPIs have largely been sellers so far?
India equity story is still riding on robust domestic inflows, which are in the excess of USD 50 billion. There has been an improvement in liquidity. But in a market like this, everyone is cautious on deploying the funds. Many institutional investors are still sitting on large cash balance as a percentage of their AUM.
At BNP Paribas, what’s your growth strategy to capture share in investment banking space?
We place clients at the centre of the strategy. We focus on the key global clients of the bank for whom we provide full scope of quality banking services across the globe. We are one of the leading foreign bank when it comes to M&A, equity and debt capital market (ECM and DCM) for our core client base.
In ECM in particular, in the financial space (banks and NBFCs), we have been a part of several marquee transactions. Being a leader in banking and financial services in Europe, we have worked extensively on IPOs for European MNCs listing in India among others. Private equity is another key area for the bank and we work with several private equity firms when it comes to IPOs or exits through blocks of their portfolio companies.
On M&A we leverage our global footprint in particular our leadership position in EMEA (Europe, Middle East and Africa) to work on helping our clients with cross-border M&A. We are involved in several inbound and outbound M&A transactions for our key clients.
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