D-Street debuts rake in $1.77 bn in Q3; momentum to continue till general elections

• In the September quarter, 21 mainboard IPOs raised as much as $1.77 billion, says an E&Y report.
• This momentum is expected to continue well into the second half of 2024.
• Companies are striving to file for IPOs before the 2024 Indian elections, the firm says.
  

The buzzing Indian initial public offer (IPO) market is the best globally, says a report by Ernst & Young. In the September quarter, 21 mainboard IPOs raised as much as $1.77 billion – marking a 3.7x growth in amount rates and 4.2x growth in number of deals.

The SME IPO market too recorded significant success by raising $165.7 million via 48 IPOs in the third quarter of 2023. And this momentum will go on for another another, predicts the consulting firm’s IPO trends report.

“The IPO landscape is witnessing a surge in activity driven by both an urge to tap the capital markets pre-or-post Indian general elections and strong economic activity, positive domestic and foreign investor sentiment towards India. This momentum is expected to continue well into H2 2024,” said Adarsh Ranka, partner and financial accounting advisory services leader, member firm of EY Global.

The pipeline ahead is strong with over 25 companies filing their Draft Red Herring Prospectuses (DRHPs) in Q3. It demonstrates a strong intent to raise funds in the upcoming quarters, the report opines.

The three largest IPOs in Q3 were RR Kable, Concord Biotech, and SAMHI Hotels. Key sectors contributing to this IPO surge included diversified industrial products, consumer products and retail, and technology.

“Market optimism is attributed to several factors, including the US recession, the Federal Reserve's pause in interest rate hikes, and inflation. Companies are striving to file for IPOs before the 2024 Indian elections, with the demand for IPOs surging this year compared to 2022,” says E&Y.

Listing gains and more IPOs

This year’s tranche of IPOs also rewarded their investors with positive listing gains. According to Pranav Haldea, managing director of PRIME Database Group, IPO response was further buoyed by strong listing performance.

The average listing gain increased to 29.4% in the first half of 2022-23. Ideaforge with 93% returns, Utkarsh Small Finance Bank with 92% and Netweb Technologies with 82% returns are some of the best performing IPOs.

“The markets continue to reward companies with robust, scalable, and well-governed business models,” says E&Y.

In line with primary market fund raises, August 2023 also witnessed a remarkable $5.2 billion in PE/VC investments. This is a 127% increase compared to August 2022 and an 18% increase from July 2023. PE/VC exits reached $4.3 billion across 37 deals, marking a 35% year-over-year increase in value.