Indian secondary market seems poised to continue its stellar run on account of political stability and several favourable macroeconomic indicators. The impact of this shall be felt in the primary market too.
Illustration: Chaitanya Dinesh Surpur
Primary market activity always follows a buoyant, or at least, a stable secondary market, albeit with a lag. Ever since Covid struck in March 2020 and indices hit significant lows, the market sentiment has bounced back with a vengeance, leading to a secular run up, with the indices now scaling all-time highs. Commensurately, there has been significant activity in the primary market as well. While FY21 saw ₹31,268 crore being raised through main-board IPOs, the good run has continued in FY22, FY23 and FY24 with ₹111,547 crore, ₹52,116 crore and ₹61,767 crore (as on March 14) being raised respectively.
From various accounts, the Indian secondary market seems poised to continue its stellar run on account of political stability and several favourable macroeconomic indicators. The impact of this shall be felt in the primary market too. The pipeline is already strong; as many as 19 companies have Sebi (Securities and Exchange Board of India) approval to raise nearly ₹25,000 crore, while another 38 companies looking to raise ₹45,000 crore are awaiting approval. New filings are likely to see a significant spurt in the coming months. Importantly, unlike in the recent years when a large number of IPO companies were from the BFSI sector, most IPOs in the last two years, and also those in the pipeline, span multiple sectors.
Another trend which shall only become more pronounced is that of companies backed by private equity (PE) investors coming to the market, where such investors are able to exit their investments. This is a sign of a maturing capital market ecosystem where the risk/growth capital to companies is now being provided by such long-term investors and only established companies, with multiple rounds of due diligence and thus better governance, are making it to the IPO market. This is unlike the past decades when a majority of companies were raising risk capital directly from the retail investors, causing huge harm. It is also important that these investors are able to exit. Such exits enable them to return money to their investors and, in turn, raise further capital.
(This story appears in the 05 April, 2024 issue of Forbes India. To visit our Archives, click here.)