In terms of IPOs, consumer tech, and EV startups should lead in 2024

According to Kaushal Shah, managing director and head of ECM at Kotak Investment Banking, 2024 will be even busier than the previous year, when at least 54 IPOs were launched.

According to Shah, who has over 20 years of expertise in investment banking, a diverse range of sectors would turn to the market to seek capital because India’s fundamentals are still strong in the face of political stability and an improving interest rate environment.

Shah states in a Moneycontrol interview that startups in consumer technology, electric cars, and digital technology will introduce their products as soon as they profit. 

How did the main market fare in 2023?

The small- and mid-cap IPO era began in 2023. Out of the 54 completed initial public offerings, over 70% had a smaller issue size of less than Rs 1,000 crore, and over 85% had a market capitalization of less than Rs 10,000 crore. The success of the IPOs was largely attributed to the sustained influence of Domestic Institutional Investors (DIIs), who set the price and the demand for the offerings. If we take IPOs worth more exceeding $100 million or Rs 800 crore into account, DIIs have been the primary driver of more than two-thirds of the anchor demand.

This year demonstrated the strength of the capital markets as several initial public offerings (IPOs) that were issued at roughly the same time received strong subscriber support from a variety of investor types. In November 2023, for example, five initial public offerings (IPOs) were conducted in a single week. Despite a cash raise of around Rs 7,400 crore, there was institutional demand exceeding Rs 1,80,000 crore and non-institutional demand of over Rs 70,000 crore.

In contrast to prior years, when this proportion was far lower, the primary fund raised in 2023 accounted for about 50% of all funds raised, indicating that more money was allocated to debt reduction, growth, and capital expenditures.

Will IPOs in the mainboard and SME divisions raise more money in 2024 than they did the year before?

January and February saw no IPOs, while the first half of the year saw just about 16% of IPOs. Nonetheless, 34 IPOs occurred over the last four months, or about nine IPOs per month on average. Since India’s fundamentals are still strong, the political environment is stable, the global interest rate environment is improving, and geopolitical concerns have already been taken into account, we anticipate that the momentum will not only continue but also pick up speed. We think that in addition to small and midcap IPOs, the market momentum will enable larger companies with greater IPO sizes to reach the market.

Which initial public offerings are anticipated in 2024?

DRHPs have been filed for more than 55 initial public offerings (IPOs), and they are varying in their stages of marketing and regulatory approval. 

Which industries including EVs are most likely to control the main market in 2024?

Unlike prior years where financial services or the new-age sector dominated in particular periods, IPOs in 2023 were widely distributed across industries like pharma, FIG (financial institutions group), real estate, auto and industrials, infrastructure, and consumers.

We anticipate seeing IPOs across a wide range of industries in 2024. However, as they reach profitability and stronger unit economics, new-age businesses such as digital tech, EV players, and consumer tech are poised to make a significant comeback.

How would you advise ordinary investors who are excited about mainboard initial public offerings?

IPOs in 2023 have produced substantial gains, primarily as a result of fair pricing and a favorable market environment. IPOs valued at more than Rs 500 crore, for instance, have provided listing gains of more than 30%. Nevertheless, the performance of a business and its solid foundation should always come first when making decisions.