India is on track to become second biggest IPO market in 2024

India has surpassed China as top market for company listings in Asia this year, after the value of listings in China fell some 86% this year from USD 48 bn last year, when it was the biggest market in the region, the Financial Times reports. Buoyant stock valuations of Indian equities fueled a surge in initial public offerings, with India’s National Stock Exchange surpassing both Dubai’s Nasdaq and the Hong Kong Stock Exchange in primary listings by value, according to Dealogic and KPMG, putting it on track to become the world’s second-largest equity fundraising market, trailing only after the US.

Behind the shift: India’s IPO boom has been driven by smaller transactions and spin-offs from multinational companies like Hyundai, as issuers rush to lock in valuations while market conditions remain favorable, the salmon-coloured paper said. “It’s been one of the busiest times in the history of Indian capital markets,” Kotak Investment Banking managing director V Jayasankar said, noting that the trend has been bolstered by significant household investments into local equity markets.

This shift reflects broader changes in Asian financial markets: Economic headwinds and tighter regulations designed “to achieve balance between primary and secondary market” have led to a slump in China’s IPO activity, stalling many companies’ plans to go public, BNP Paribas strategist Scarlett Liu said. On the other hand, Hong Kong has emerged as a bright spot, with equity raising surpassing USD 10 bn, led by high-profile transactions like Midea’s USD 4 bn secondary listing and supported by its appeal as an offshore financial hub for Chinese firms.

Is India a bubble waiting to burst? “Obviously the number of transactions has gone up but the average ticket size per transaction is down about 75-80% in the last two years,” said one Mumbai-based banker. “Now, what that tells me is [companies are thinking] ‘run for the hills, let’s try to cash in as quickly as we can, whatever we can while market conditions remain supportive.’” The country’s reporting weaker corporate earnings and slower GDP growth — with growth falling sharply to 5.4% in 3Q 2024 — which has raised concerns among foreign portfolio managers of a potentially frothy market, prompting them to pull some USD 11 bn from Indian equities in October and USD 2.5 bn in November.

Local bankers disagree, with many citing a healthy pipeline of IPOs and ample liquidity as signs that the market is still healthy with a lot of activity expected in the first half of 2025.

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