Learn how these offerings aim to raise ₹20,000 crore and explore market trends in December’s vibrant primary market
The Indian primary market is poised for a significant uptick as at least 10 companies prepare to launch initial public offerings (IPOs) in December, collectively aiming to raise around ₹20,000 crore. These IPOs span diverse sectors, including retail, finance, healthcare, and diagnostics, signaling robust investor interest and a positive market environment.
Key Players in the Upcoming IPOs
- Vishal Mega Mart
Vishal Mega Mart, a major player in the retail sector, is gearing up for an ₹8,000-crore IPO. The entire offering will be an offer-for-sale (OFS) by promoter Samayat Services LLP, with no fresh equity shares issued. This move is expected to provide liquidity for the promoters while giving retail investors an opportunity to participate in one of India’s leading supermarket chains. - International Gemmological Institute (India) Ltd
The diamond grading firm, owned by Blackstone affiliate BCP Asia II TopCo Pte Ltd, is planning an IPO worth ₹4,000 crore. The offering comprises a fresh issue of ₹1,250 crore and an OFS valued at ₹2,750 crore. The proceeds from the fresh issue will likely be used for business expansion and operational enhancements. - Avanse Financial Services
Education-focused NBFC Avanse Financial Services is set to raise ₹3,500 crore through its IPO. This will include a fresh issue of ₹1,000 crore and an OFS of ₹2,500 crore by selling shareholders. The funds raised from the fresh issue will bolster the company’s capital base to support future growth. - Other Prominent IPOs
The month will also witness public offerings from Sai Life Sciences, Paras Healthcare, Suraksha Diagnostic, Mamata Machinery, and Transrail Lighting, among others. Each of these companies aims to use the IPO proceeds for various objectives, including expansion, debt repayment, and operational improvements.
Record-Breaking IPO Activity in 2024
The year 2024 has been exceptional for IPOs, with 75 companies, including big names like Hyundai Motor India, Swiggy, NTPC Green Energy, Bajaj Housing Finance, Ola Electric Mobility, and FirstCry’s parent Brainbees Solutions, raising a cumulative ₹1.3 lakh crore. This figure is significantly higher than the ₹49,436 crore raised by 57 firms in 2023. The surge highlights a growing appetite among issuers and investors, driven by favorable market conditions and strong economic indicators.
Market Sentiment Post Maharashtra Elections
The decisive victory of the BJP-led Mahayuti alliance in the Maharashtra state elections has boosted investor sentiment. The rally in equity markets on Friday, ahead of the counting, and on Monday, with the Nifty 50 and Sensex gaining 1.5%, reflects the market’s optimism. Political stability is often seen as a catalyst for economic growth and market confidence, and the recent election outcomes are expected to further stimulate IPO activity.
Challenges in the Primary Market
Despite the buoyant market, certain challenges persist. Recent IPOs have faced difficulties in the secondary market, with pricing during bull runs often leading to inflated valuations. This underscores the need for cautious optimism among issuers and investors.
Saurabh Patwa, Head of Research and Portfolio Manager at Quest Investment Advisors, highlighted the potential strain on liquidity with over 30 IPOs anticipated in December. The market’s ability to absorb such a massive pipeline could be tested, especially if foreign investors continue withdrawing funds.
Historical Gains for IPO Investors
Over the past five fiscal years, IPO investors have reaped substantial rewards. Between FY21 and FY25, 236 IPOs delivered an average listing gain of 27% for retail investors, with current gains soaring to 105% as of October 31, 2024. This impressive performance underscores the attractiveness of IPOs as an investment avenue, particularly during periods of strong market momentum.
Notable Trends in the IPO Market
Diverse Sector Participation
The upcoming IPOs showcase participation from a variety of sectors, including retail, healthcare, education finance, and diamond grading. This diversity reflects a broad-based growth in the economy and provides investors with multiple options to diversify their portfolios.
Increased Use of Offers-for-Sale
Several companies, including Vishal Mega Mart and International Gemmological Institute, are leveraging the OFS route to provide an exit for existing shareholders. This trend highlights the growing maturity of the Indian capital markets, enabling promoters and private equity investors to monetize their holdings effectively.
Focus on Debt Repayment and Expansion
Many companies are using IPO proceeds to retire debt and fund expansion plans. For instance, Avanse Financial Services aims to strengthen its capital base to support its future growth trajectory.
Active Grey Market
The resurgence of activity in the grey market indicates strong demand for upcoming IPOs. This trend is often seen as a precursor to robust subscription levels, particularly in the retail and high-net-worth individual (HNI) categories.
Key Risks and Considerations
Valuation Challenges
Pricing remains a critical challenge, particularly during bull runs when issuers seek higher valuations. Investors need to exercise caution and conduct thorough due diligence before participating in IPOs.
Liquidity Constraints
With over 30 IPOs expected in December, the market’s liquidity could be stretched. This may impact the subscription levels of individual offerings, particularly for smaller issues.
Foreign Investor Outflows
Continued withdrawal of funds by foreign institutional investors (FIIs) could dampen market sentiment and affect IPO performance. Companies and investors alike need to monitor FII activity closely.
Opportunities for Retail Investors
Retail investors have historically enjoyed significant gains from IPOs, and the current pipeline offers several opportunities to participate in high-growth sectors. Companies like Vishal Mega Mart and Avanse Financial Services provide exposure to consumer-centric and education-focused businesses, while International Gemmological Institute represents a niche segment with strong global demand.
The primary market is set to close 2024 on a high note, with a robust pipeline of IPOs expected to raise ₹20,000 crore in December. Political stability, favorable market conditions, and a surge in investor interest are driving this momentum. However, challenges such as valuation concerns and liquidity constraints cannot be ignored. For investors, careful selection and a long-term perspective remain key to capitalizing on the opportunities presented by the vibrant IPO market.
