India’s growth, rising corporate earnings leading the IPO boom: Citibank

The growth of the Indian economy and rise in corporate earnings are the key drivers of the increase in initial public offerings (IPOs) in India. As a result, many large MNCs are now keen on going public, despite the disappointing stock market debut of Hyundai Motor India, says Rahul Saraf, Head of Investment Banking, Citi India, which was an advisor on Hyundai’s IPO.

Today, India is the fourth largest economy, growing at a healthy rate with rich valuations and with inflation in check, and this is boosting Indian investors’ confidence. The participation in this IPO boom is seen across the investor universe, be it from FIIs, DIIs, HNIs, or retail investors, Saraf said during Citibank’s media roundtable.

According to him, investors are also being attracted by consistent market returns of over 12% since 2019, barring 2022. Other contributing factors include outflows from some countries and India’s inclusion in the global bond indices.

He also remains confident despite Hyundai Motor India’s tepid listing day performance. “I think the way you have to think about Hyundai is not one day of performance. The stock was up 0.5% yesterday, and it’s over a period of time that one will know whether the stock is doing well or not. Also, we feel very confident in terms of the interest levels, as with Hyundai we saw the best-ever anchor book in many, many years. ”

Hyundai’s IPO was subscribed 2.37 times, with the quota for qualified institutional bidders (QIBs) seeing a subscription of 6.97 times the shares on offer. The portion reserved for non-institutional investors and retail investors saw muted response. 

Arvind Vashistha, Head of India equity capital markets (ECM), spoke about the increasing interest of FII in India and Asia at large: “More people are moving into Asia to run the funds. Apart from that, we’ve seen some sporadic investors coming in from locations outside of Singapore, London, continental Europe, and the US, but that number is not a lot, and the trend is not material at this point in time. We also see meaningful IPO-level conversations and interest from Canada, Japan, Australia, and the Middle East.” He added, a key challenge FIIs face is the limited IPO allocation they get, which isn’t meaningful enough for them to keep track.

Saraf said the pipeline looks very exciting in 2025. He is hopeful of an increase in M&A activity. “This year we had almost 50,000 transactions. We have 15% market share. We are number one in ECM and M&A. So, we feel we have a good sense of the activity levels that are likely to come. And our pipeline is stronger at this time than last year,” he adds.