India has witnessed a significant surge in companies going public through Initial Public Offerings (IPOs) in the past few years. In FY24 alone, 76 companies raised a cumulative amount of ?61,915 crore through IPOs, marking a notable 19% increase from the previous fiscal year. Some of these recent IPOs are moulding industry growth dynamics and are slated to have a bigger impact on the future of the Indian economy. Let’s find out how IPOs are driving growth in key industries.

Why are More IPOs Coming Up?

An IPO, or Initial Public Offering, is a process through which a company offers its shares to the public for the first time. 

Lately, India's stock market has seen an impressive array of big-ticket IPOs. Companies from various sectors are raising substantial capital by going public to fuel their expansion and innovation needs.

For instance, Tata Technologies, a subsidiary of Tata Motors, made headlines with its much-anticipated IPO in November 2023. This IPO issue of approximately ?3,000 crore significantly bolstered its financial position and market visibility. Investors benefited from listing gains of over 140%, which refers to the profit made when the stock price on the listing day exceeds the IPO issue price.

Another notable example is Mankind Pharma, which launched a substantial IPO worth ?4,326 crore in 2023. Additionally, the number of SME IPOs has surged in recent years, with even Small and Medium Enterprises (SMEs) raising funds by listing on stock exchanges.

Some of the factors that are driving the surge in IPO activity are:

1. Robust growth trajectory of the Indian economy is prompting companies to seek additional capital for their expansion plans. 

2. Favorable regulatory reforms have made the IPO process more streamlined and efficient, encouraging more companies to go public. The Securities and Exchange Board of India (SEBI) has reduced the listing timeline to three days, simplified the documentation process, and improved transparency, making it easier and less costly for companies to go public.

3. There is also growing investor confidence in the Indian market. Domestic and international investors are keen on investing in Indian companies due to promising growth prospects and attractive investment deals. 

How IPOs are Shaping the Future of Industries

Exciting times lie ahead, with many IPO opportunities likely to come up in 2024. One of the most anticipated IPOs is from Hyundai, expected to be valued at around ?25,000 crore. Other high-profile IPOs to watch out for include Ola Electric, Swiggy, and Haldiram's.

India’s technology sector continues to thrive, with several startups and established companies planning to go public. You can also look forward to IPO activity in the renewable energy and electric vehicles sectors, considering there is a global shift towards sustainable energy solutions. Companies in these sectors attract substantial investor interest due to their promising potential for long-term growth.

Also Read - All you need to know about How to apply for an IPO?

The Serious Truth You Should Know About IPOs

IPOs might seem like an exciting opportunity to invest, but some of the high-profile listings like Zomato and Paytm have exposed critical issues you should be aware of.

One of the major concerns is Overvaluation. Some companies may be priced based on optimistic future growth rather than their current performance. This leads to inflated expectations, and many investors faced significant losses when stock prices drop post-listing. For instance, Paytm's listing price was set at ?2,150 per share, and it listed 9% lower at ?1,955 per share. The stock's closing price on the first day of listing was 27% below at ?1,564 per share.

Additionally, you must also consider the impact of lock-in periods for promoters and early investors. When these periods end, large sell-offs can occur, driving stock prices down further. It's crucial to evaluate a company's fundamentals and not get swayed by the hype surrounding IPOs.

Conclusion

As 2024 promises to be an exciting year for IPOs, keep an eye on the latest news and market trends to tap onto the right opportunities. To explore such opportunities more efficiently, you can work on enhancing your knowledge about the stock markets. There are various high-quality resources available on Sharekhan Knowledge Center that can help you upgrade your understanding of the markets.