 "contrary to a 20-year-long trend, the Indian IPO market is buzzing ahead of the 2024 Lok Sabha elections. Source: Stock Image")
In the past 20 years up till October 2023, the primary market in India has always witnessed a lull ahead of the Lok Sabha elections. The number of initial public offerings (IPOs) hitting Dalal Street would typically drop to the low single digits in the six-months leading up to the polls. The buck stops here.
Ahead of the Lok Sabha 2024 polls, which are expected to usher in another five-year term for the ruling Bharatiya Janata Party (BJP), companies have been busy launching their maiden issues.
The record so far
From October 2023 to February 2024, as many as 39 companies have launched their IPOs. These firms, hailing from diverse industries, have sold equity shares cumulatively worth Rs 33,253.07 crore, Moneycontrol reported, citing data from Prime Database. Fundraising that took place in the previous election years did not even come close to this record number.
In the two quarters ended March 2023, there were only four IPOs that opened for subscription
In the six-month period from October 2013 to March 2014, that counter stood at zero
For the same period in 2008-09, the primary market was equally lackadaisical, with only 2 public issues being launched. This, however, could be linked to the impact of the global economic crisis of 2007-08
From October 2003 to March 2024, 14 companies went public
Why is IPO market buzzing?
A few reasons for the uptick in fundraising from the primary market are:
Certainty regarding poll results: Investors and companies are comparatively much more certain about the outcome of the 2024 elections. The BJP’s anticipated return to power has fostered a strong positive sentiment among them
Broader investor base: The number of registered investors in India has seen a substantial rise in the past couple of years. Ease of access to investment, the allure of mutual fund schemes, as well as confidence in the Indian growth story are all reasons for this. With the increased number of domestic investors, the amount of capital available for fundraising has gone up as well– a fact that companies eager to go public did not miss
The lure of high valuations: In recent times, companies have rushed to cash in on the positive investor sentiment not just to raise money, but also to get high valuations. After all, soaring valuations have been a persistent trend on the coattails of the market rally
Optimism in broader market: After the end of the pandemic, and following a gradual business recovery, listed companies reported hefty earnings. Simultaneously, China’s strict Covid-19 restrictions and tumbling markets sent foreign investors hunting for growth opportunities elsewhere. That has led to benchmark Nifty 50 and Sensex indices soaring
With inputs from agencies