Moneycontrol Pro Panorama | Will the IPO juggernaut slow down in 2025?

World Street offers a sneak peek into the world of business and economy.

Dear Reader,

The year 2024 has proven to be a watershed moment for fundraising in India, particularly through Initial Public Offerings (IPOs). Despite the year not being characterized by extraordinary market returns, the sheer volume of capital raised has set new records, showcasing robust confidence among investors and issuers alike.

According to a report by Motilal Oswal, the primary market witnessed an unprecedented fundraising exceeding Rs 1.80 lakh crore raised through 317 IPOs, eclipsing the previous high of Rs 1.3 lakh crore recorded in 2021 and significantly surpassing last year's total of Rs 57,600 crore.

The largest IPO underscores this remarkable achievement in Indian history from Hyundai Motor India, which alone raised Rs 27,870 crore. The average size of IPOs has also seen an impressive increase, rising from Rs 867 crore in 2023 to approximately Rs 1,700 crore in 2024.

Interestingly, this surge in fundraising has occurred amidst relatively subdued market conditions compared to the vibrant landscape of 2021. The Nifty index has delivered an 8.3 percent return year-to-date, a stark contrast to the approximately 20 percent return seen in 2021.

Nevertheless, private equity players have capitalized on this environment to secure exits worth over $5 billion through various deals, indicating a healthy appetite for investment despite the broader market dynamics.

The shift towards equity funding is becoming increasingly pronounced among businesses. Corporate India is now operating with its lowest leveraged balance sheets in six years, as evidenced by the declining debt-to-equity ratios among non-financial corporations. This trend reflects a strategic pivot towards strengthening financial positions through equity rather than debt.

As we look toward 2025, the outlook remains optimistic. The IPO pipeline is robust, with 75 companies preparing to enter the market, potentially pushing the primary market issuance size to Rs 2.5 lakh crore. Notable upcoming IPOs include HDB Financial Services with a proposed issue of Rs 12,500 crore, Hexaware Technologies with an Rs 9950 crore offering and LG Electronics India aiming for an Rs 15,000 crore public float.

Analysts anticipate that the number of new-age companies entering the market will double during 2025 compared to 2024, further invigorating investor interest. The IPO pipeline for 2025 includes 75 names to date, which will take the primary market issuance size to Rs 2.5 lakh crore.

Interestingly, 2025 is also expected to see twice the number of new-age companies hitting the market as they did in 2024. Among the prominent names are Bluestone, Ather Energy, and Ecom Express, which have filed draft prospectuses.

While 2024 may not stand out for its absolute returns, it has undoubtedly been a banner year for fundraising in India's equity markets. The momentum generated this year sets a promising stage for continued growth and activity in 2025 and beyond. As private equity firms and institutional investors increasingly favour equity routes for funding businesses at various growth stages, the landscape of corporate financing in India is poised for transformation.

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