2024 is shaping up to be an extraordinary year for initial public offerings (IPOs), poised to surpass the impressive Rs 1.6 lakh crore raised in 2023. Despite a decline of 3% in the Sensex and Nifty-50, and a staggering 12% drop in the broader market since the start of this year, the enthusiasm among companies looking to go public remains robust. Last year, the Sensex delivered returns of 8.2%, while mid-cap and small-cap indices saw gains exceeding 25%.

Anticipation for Record-Breaking IPOs

As nearly 70 companies await approval from the regulator, projections indicate that the total funds raised this year could reach approximately Rs 1.82 lakh crore, based on data from primedatabase.com. This influx of IPOs is expected to be a significant driver in the market.

SEBI’s Approval and Prominent Players

The Securities and Exchange Board of India (SEBI) has already given the green light to 44 IPOs, which are anticipated to generate around Rs 66,095 crore. Noteworthy contenders entering the market include:

• LG Electronics India: Aiming for an IPO of Rs 13,000 crore.
• HDB Financial Services: Targeting Rs 12,500 crore.
• Schloss Bangalore, Credila Financial Services, and Dorf-Ketal Chemicals India: Each planning to raise Rs 5,000 crore.

Investor Enthusiasm Remains Strong

Despite the vast supply of upcoming IPOs, investment bankers are optimistic about the demand for new listings. Many smaller investors are particularly drawn to the potential gains. According to a merchant banker, “IPOs launched from April 2024 to mid-February have averaged gains of nearly 30%.”

The anticipated subscriptions for these issuances are expected to mirror the strong demand seen last year, catering to a diverse pool of investors, including family offices, alternate investment funds (AIFs), high-net-worth individuals (HNIs), and retail investors. Notably, this optimism persists even amidst a challenging sentiment in the secondary markets, where foreign portfolio investors have been reducing their risk exposure.

Market Sentiment and Future Outlook

Siddarth Bhamre, Head of Institutional Research at Asit C Mehta, suggests that the appetite for IPOs typically correlates with bullish market conditions. He noted, “When the market corrects, even companies with solid fundamentals may struggle to attract subscriptions.”

Pranav Haldea, MD of Prime Database Group, acknowledges the flurry of IPO filings but cautions that some companies might delay their plans due to current market conditions. “I wouldn’t be surprised if some firms let their approvals lapse given the subdued environment,” he remarked.

While confidence among bankers is palpable, they anticipate a portfolio rotation among institutional and HNI investors. The upcoming IPOs, like that of LG, are likely to prompt adjustments in investment strategies.

Last Year’s Highlights

In 2023, firms such as Hyundai Motor India (raising Rs 27,859 crore), Swiggy (Rs 11,327 crore), NTPC Green Energy (Rs 10,000 crore), and Vishal Mega Mart (Rs 8,000 crore) made significant market entries.

Recent Developments in the IPO Space

The recent Hexaware Technologies IPO was met with considerable enthusiasm, achieving 2.66 times subscription on its final day, primarily driven by institutional investors, though retail participation was limited to just 11%.

Looking ahead, the secondary markets are expected to stabilize in the coming months. “Typically, IPO activity surges during bullish periods, while it dwindles during volatile or bearish phases,” Haldea explains, highlighting the cyclical nature of the market.

As 2024 unfolds, the IPO landscape appears vibrant, offering promising opportunities for investors and companies alike.