INSUBCONTINENT EXCLUSIVE:
3 min read Last Updated : Oct 16 2024 | 12:13 AM IST
The initial public offering (IPO) landscape in India is set to witness a change
Despite this decline, experts maintain that the robust fundraising of over Rs 33,772 crore via fresh share sales reflects continued strong
Over the past 10 years, capex by the private sector has been relatively subdued, but with the economy now looking up, fresh capex by the
corporate sector has increased
and group head of equity capital markets at SBI Capital Markets.
A company can raise funds through an IPO either by issuing fresh shares,
selling existing shares, or a combination of both
Between 1989 and 2012, apart from two exceptions, fresh issues made up more than 50 per cent of the total issue size
However, since 2013, secondary issuances have become more prevalent, thanks to a rise in private equity investments.
Market analysts
point out that fundraising patterns have evolved over the past decade, with private equity (PE) and venture capital increasingly replacing
IPOs as the primary source of initial funding
Consequently, companies are now turning to the IPO market later in their lifecycle
Kaushik.
PE players have also adopted aggressive post-listing share sales, leveraging the robust liquidity available
Analysts note that the offer for sale (OFS) component of IPOs might have been even larger if not for the alternative of secondary market
after the lock-in period, sell the remaining shares via block trades when valuations are richer.
While the high proportion of fresh
issuances is viewed positively by market watchers, the success of IPOs involving secondary share sales is also being seen as a sign of
This trend provides PE investors with exit opportunities, which in turn frees up capital for investment in new ventures
It also allows promoters to liquidate some of their holdings, which can be an incentive for listing, as exemplified by HMIL.
Experts
further note that IPO valuations are closely tied to secondary market valuations
Currently, the price-to-earnings multiples in Indian markets rank among the highest globally, encouraging a growing number of companies to
go public.
Looking ahead, the OFS component is likely to dominate, as full or partial exits play a larger role in major issuances
