India’s Thriving IPO Market: Record-Breaking Offerings and Investor Enthusiasm Set to Surge

IPOs are the most anticipated events in the investment space. In 2024, India’s IPO market surged, with over 260 companies raising more than $9 billion—more than double the amount from the previous year. This boom in IPOs has generated strong investor interest. For example, Jyoti CNC Automation and Premier Energies saw gains of up to 250% and 146.93% since their listings.

Retail investors have driven this trend. New stocks have risen an average of 57% since their debut, outperforming the overall market. For example, Hyundai Motor India plans to raise a record ₹27,855 crore through an IPO. In this context, let’s analyze the five largest IPOs in India and their performances so far.

Twelve companies have raised more than ₹11,000 crore so far in September 2024, marking the best month for IPOs in India yet. This has resulted in mainboard issues at an all-time high for the year and the fifth highest over two decades. The SME space has also had a healthy showing, with 39 entities raising about ₹1,542 crore. Again, this reflects a buoyant IPO market in which market confidence is solid and investors are eager again-and a reflection of a resilient Indian economy.

A total of 62 firms have successfully raised an incredible ₹64,485 crore in 2024 and 204 SMEs ₹6,959 crore. With the momentum, more than 40 draft IPO papers have been filed. Indeed, Hyundai and Swiggy are among those on the list, signifying that the momentum might stay well into FY2025. Let us look at the Six biggest IPOs in India and how have they fared so far.

Key IPOs

Hyundai (Biggest IPO)

Hyundai Motor India is the group company of the Hyundai Motor Company, which is an internationally renowned automobile company.

Hyundai Motor India Ltd will launch its largest IPO in Indian history, as the company aims for a valuation of $19 billion. The company plans to mop up as much as $3.3 billion or approximately ₹27,000 crore by selling a 17.5% stake or 142.2 million shares at a price band of ₹1,865-1,960 per share. The IPO dates are scheduled for October 15-17, 2022.

The difference this time is that the entire proceeds will be taken by the parent company in Korea. If the issue is successful, it will break the record of LIC and will show the capacity of Indian capital markets to undertake large public issues.

Life Insurance Corporation (LIC)

A state-owned insurance goliath in India. The LIC’s IPO, released last week, turned into the biggest in India after a record, as the floating of 316 million shares over May 4-9 at the price band of ₹902-949, with a discount for both policyholders and retail investors.

It had almost 1.5 times oversubscription to fetch bids worth ₹2.95 lakh crore versus the offer size of ₹20,557 crore. On May 17, 2022, the stock came at ₹867 per share. After a series of market fluctuations, the stock is currently available at around ₹620.

One97 Communications (Paytm)

One97 Communications is the parent company of the fintech giant Paytm. Before LIC, the largest IPO in India was held by Paytm. It raised around ₹18,300 crore in November 2021 through a fresh issue of shares worth ₹8,300 crore and an offer for sale of ₹10,000 crore.

The IPO price range has been set at ₹2,080-2,150 a share. The IPO opened at the stock exchanges on 18 November 2021 at ₹1,956. The stock had depreciated more than 60 per cent from its issue price.

Coal India

It is the largest government-owned coal mining and extraction company in the country. Coal India IPO raised a sum of more than ₹15,000 crores from issuing 10 per cent government shares in the year 2010. The IPO was opened for over 2.4 billion shares with 631 million shares on offer.

It was listed on November 4, 2010, at ₹287 on the NSE, which is a 40% premium over the IPO price of ₹245. The stock price has been steadily going up, and it currently trades around three times the IPO valuation.

Reliance Power

Reliance Power was a power generation giant from India. In January 2008, Reliance Power launched the largest IPO to mop up Rs 11,700 cr and issue 260 mn shares @ Rs 405-450/each. The company came with a house name, Reliance Group; although it fetched bids for shares to the tune of above 19 billion. While its subscription rate works 73 times.

Yet on the stock market, it witnessed the day of trading at just Rs 600 in February 2008, while so far, the stock has dented below 90 per cent which was due to high debt as well as project delay together with losses.

General Insurance Corporation of India (GIC Re)

GIC Re is a state-owned reinsurance company headquartered in India. GIC Re’s IPO in October 2017 was sold for more than ₹11,000 crore, the largest public offering since then. This company issued 123 million shares in a price range of ₹855-912 and was oversubscribed 1.38 times.

GIC Re started trading on October 25, 2017, at ₹850 per share, being 7% below its IPO price. It is also to be noted that the stock has since appreciated more than 55% to date under better market conditions and financial stability.

What’s driving the current IPO Boom?

Analysts point to the following key factors as contributing to the rise in IPO activities.

• Market Conditions: Stock markets are undergoing cyclical highs or peaking all-time peaks, which instils a sense of optimism among investors.
• Liquidity Galore: DII inflows at a decade high of ₹24,000 crore and retail participation touching an all-time high.
• Decent Gains: Scores of IPOs returning over 30-40%, thus making the comfort of the retail and the confidence of investors, that much better; encouraging further participation in the market.

 Top Indian IPO Trends for October 2024

• Transaction Fee Reforms: BSE and NSE reformed transaction fees for cash and derivatives trading effective from October 1, following the mandate of SEBI on a uniform fee structure for all exchanges.
• Hiked Securities Transaction Tax: The Finance Minister hiked the STT for Futures & Options trading in an attempt to discourage retail derivative activity, hoping it would affect market volumes and revenues for exchanges and SEBI.
• New Tax on Share Buybacks: The income generated from share buybacks would be taxed just like dividends from October 1 because this would shift the tax burden of companies to their shareholders and will induce more capital return more efficiently.
• FPI Outflows: The FPIs faced an outflow of ₹82,479 Crore because of high valuations and political tensions. Most FPIs have now started investing in the Chinese markets since that markets’ stability, is being offered.
• RBI Retains Repo Rate Steady: On October 9, the RBI retained the repo rate at 6.50% and sustained the growth of GDP at 7.2% with core inflation stable against the broader economic confidence.

Considerations for Investors

IPOs are very attractive, especially with success stories of people reaping huge profits. Nevertheless, it is important to approach IPO investing with a lot of caution and proper scrutiny. Here are several key factors to check before buying an IPO:

• Company’s Financial Position: Check the financial statements of the company, including profitability, revenue growth, and debt levels. Sound financials are the key to continued long-term success.
• Prospectus Review: The prospectus is a legal document disclosing all essential information regarding the company, including the operations, financials-related risks, and the intention of using funds to be raised. You would thereby understand the business model and some of the potential difficulties in going through the prospectus.
• Market Trends and Industry Analysis: Gauge the sector in which the company operates as well as the prevailing trends in the market. It is thereby easy to understand the scope for growth if the company is placed in a flowering sector.
• Competitive Analysis: Understand how the company stands in a competitive landscape. This could help you understand how well your investment is going to be stable and profitable.
• Valuation Analysis: Determine if the IPO price is justified by company financials and comparable companies. An overpriced IPO may hamper the chances of achieving desired returns.
• Lock-Up Periods: Confirm if any lock-up periods do not allow the insiders to sell their shares immediately after the IPO. The same factor can be very crucial in altering the supply and demand dynamics in the stock.
• Reputation of Underwriters: Determine if the investment banks or the underwriters managing the IPO are reputable. Good repute of underwriters creates more confidence in the offer being genuine.
• Tracking Market Sentiment: Watching general market sentiment and investment in IPOs. Good times in the market bring ease to new issues as well.

Conclusion

The IPO market in India is experiencing an exciting time. September saw record activity and strong interest from investors. Twelve firms raised over ₹11,000 crore through IPOs, including well-known brands like Hyundai and Swiggy. This reflects good investor confidence.

Positive market conditions, high liquidity, and strong returns from recent IPOs support this upward momentum and boost retail participation. For prospective investors, financial health, market trends, and valuation are crucial before making an investment decision. As October approaches, upcoming IPOs are expected to perform well in this dynamic and resilient market.