Kotak’s S Ramesh: IPOs to grow further after average size more than doubled to ₹2,000 crore this year

“The average size (of IPOs) is roughly approx. ₹It will approach 900 crore ₹2,000 crore because this year there were some major IPOs of companies like Bajaj Housing Finance, Hyundai, FirstCry and Swiggy. So I think it is moving towards a larger size on average,” Ramesh said in an interview, without making any predictions.

Major IPOs in 2024 include Hyundai Motor India ( ₹27,870 crore), Swiggy ( ₹11,237 crore), Bajaj Housing ( ₹6,560 crore), Ola Electric Mobility ( ₹6,145 crore) and Brainbees Solutions (FirstCry) ₹4,193.73 crore. Carlyle Group Inc plans to sell a $1 billion stake in portfolio company Hexaware Technologies Ltd later this year or in 2025.

It’s been a busy year for investment banking teams across banks, given the buoyancy of the capital market. There were 73 IPOs in the current calendar year, reaching $16.7 billion ( ₹1.4 trillion), Kotak Investment Banking said, citing data from Prime Database. That’s more than double the 58 IPOs worth $6.35 billion in 2023, the data showed.

The companies’ follow-on share sales also peaked in 2024. There were 93 follow-on shares sold for more than $13 billion, compared to 58 for $7.7 billion in 2023.

fiscal sponsors

The deepening of Indian capital markets is largely owed to the growing pools of capital held by domestic institutional investors. According to Ramesh, the mix of active foreign investors in India has also changed over the years; Those from the Far East were more consistent.

“Investors from the Far East, including India, have been more consistent in investing in Indian IPOs, while those from Europe, the UK and the US have been more selective. “I expect this trend to continue,” he said.

Often, IPOs involve the issuance of new shares by the company raising the funds, as well as sales of shares by promoters and existing investors. Early investors in companies try to cash out their profits during the IPO.

Ramesh said financial sponsors (private equity firms) have come of age in the Indian market and have become increasingly active since 2019, with more companies likely to consider sponsors as their first choice of external capital in the future. This is also driving a lot of deal activity, which has been dominated by sponsor sales or partial PE exits this year.

“Approximately $10 billion of the $24 billion in sales we saw this year are organizer sales. “The rest are all fiscal sponsors,” he said.

Meanwhile, PE investors have become an important element in IPO pricing, Ramesh said.

“Financial sponsors are an important stakeholder in IPO pricing,” he said. “When I look at the scope of public offerings, there is a very interesting situation.jugalbandi This happens between mutual funds, which own all the money and are in some ways the price setters, and many fiscal sponsors and promoters who are equity sellers but especially fiscal sponsors. “And what we’re realizing is that that determines the advent of IPO pricing,” he explained.

He said mutual funds are equally focused on long-term expectations and short-term fluctuations in earnings and markets, compared to selected FPIs that focus more on long-term expectations. He added that mutual funds tend to have a deeper understanding of certain sectors and businesses because they are India-based and have a better understanding of immediate potential challenges such as growth issues.

Ramesh expects mergers and acquisitions (M&A) in the domestic market to increase. According to him, more than mergers and acquisitions by global players and overseas acquisitions of Indian companies, domestic consolidation is a theme that is likely to pay off.

“Merger and acquisition activities have accelerated this year. Local companies are quite active. In fact, domestic companies are where all activities take place. “And if you look at the sectors, the places where consolidation is happening are cement, pharmaceuticals and financial services,” he said.