India's IPO momentum grows on strong fundamentals and investor confidence: Ranvir Davda, HSBC
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The resurgence in Indian equity capital market deals is being driven by a confluence of positive factors — stabilising geopolitical tensions, easing trade uncertainties, encouraging full-year corporate earnings, improving high-frequency macro indicators, renewed FII interest, and sustained retail inflows into domestic mutual funds, said Ranvir Davda, Co-Head of Investment Banking at HSBC India.However, he noted that investors want to focus on companies that have a differentiated story compared to already listed companies and are looking to deploy capital in size for long-term growth opportunities.The recent stabilisation in geopolitical tensions and the easing of trade uncertainties have resulted in reduced market volatility, reinforcing investor confidence and enabling recovery in deal activity. Emerging positive trends in full-year results and improving high-frequency macro indicators have further aided market sentiment.FII buying in the secondary market to the tune of $2 billion-plus and continued retail inflows into domestic mutual funds have supported this resurgence. Against this stable backdrop, IPOs at optimal valuations, featuring superior governance, differentiated moats, and well-funded growth plans, have garnered strong interest from both local and international investors, offering long-term value creation.Filings and issuer conversations remain highly active, and the pipeline is expected to continue growing in 2025. There are several high-quality, mid-sized and large $1 billion-plus IPOs currently in progress and continue to garner the right investor attention. Given the macroeconomic factors supporting India's growth and the continued confidence of both global and local investors, we expect many of these IPOs to be successfully launched in the next few months.In our view, given the numerous macroeconomic factors supporting India's growth, a regulatory landscape conducive to primary markets, as well as sustained capital inflows, we expect to continue seeing strong deal momentum in India. Despite a slow start for capital markets in 2025, aggregate fundraising currently stands at over $15 billion, led by secondary blocks at $11 billion, with large, upsized deals and IPOs receiving robust subscriptions.This bodes well for the next wave of transactions. We believe that IPOs, blocks, and follow-on activity in the second half of calendar year 2025 will be significantly higher compared to the first half, with multiple companies having already received Sebi approval and several other listed companies having announced plans for fund-raising.We have been part of 3 of the top 5 largest IPOs so far in 2025. Based on our observations, investors are focusing on companies that have a differentiated story compared to already listed companies and are seeking to deploy capital in size for long-term growth opportunities. The approach is to identify winners and take larger positions rather than distributing ownership over multiple deals.Discussions on valuation are also more nuanced and bottom-up, with a deep groundwork, discussions on operating and financial KPIs, and a focus on company strategy to achieve margin-accretive growth. Therefore, we believe this approach has also helped issuers receive more effective feedback to inform pricing discussions at the time of the initial public offering (IPO).While the pipeline is quite diverse, investor interest is high in sectors such as manufacturing , industrials, clean energy, and new economy tech. Tech continues to have a sizable pipeline across B2B, fintech, consumer tech, and health tech, all of which are commanding significant investor attention.The listing of scaled Indian subsidiaries of multinational corporations (MNCs), as well as of Indian conglomerates, continues to remain a key theme for IPOs in India. We believe these trends will persist and stay relevant over the next 12 to 24 months.We believe that China+1 is one of the stronger themes that has been playing out over the last couple of years. However, the structural growth story in India, which encompasses manufacturing and participation in the global supply chain, is larger than the China+1 strategy.India, with favourable demographics, a strong local consumption economy, as well a significant presence in the tech-enabled start-up ecosystem, is uniquely positioned as a regional growth story combined with an export-driven upside.We've seen the 'Make in India' theme playing out in multiple sectors like EMS, defence, clean energy, chemicals, and pharma, amongst others. We believe that these sectors are already experiencing local and outbound M&A, as well as an increase in private capital expenditure, which adds to possible fund-raising opportunities from both private and public markets.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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