Tuesday's listings of shares of FirstCry and Unicommerce are the latest in a series of remarkable market debuts for companies. Infact, the recent wave of listings not only highlights enthusiasm among investors but also reflects a broader confidence in the companies' business models.
Strikingly, even the recent global market sell-off failed to dampen investor spirits. But the question is: Will this enthusiasm continue? Experts said it likely will.
“We are likely to see several high-quality, successful venture and private equity-backed companies coming to the market in coming months," V. Jayasankar, managing director and head of equity capital markets, Kotak Investment Banking, said.
The successful listings of Ola Electric and FirstCry reinforce investor appetite for pure-play EV and consumer tech companies with strong business moats. He observed that despite a global equity sell-off during the launch of these two IPOs, Indian equity markets demonstrated the depth and liquidity to absorb large offerings.
Many large IPOs are expected in the second half of FY25, experts said.
In FY24, the number of IPOs surged by 66%, rising from 164 in FY23 to 272. The total amount raised also increased by 24%, growing from ₹54,773 crore in FY23 to ₹67,995 crore in FY24.
Prashant Rao, director and head-equity capital markets, Anand Rathi Investment Banking, said that investors are confident because they have seen strong post-listing performance from the IPOs over the last few quarters. This makes investors believe this trend should persist, expecting similar returns in the future as well, he added.
Rao highlighted that the average returns of companies (as on July 31, 2024) that got listed since January this year have been more than 45%.
With the mutual fund industry's assets under management (AUM) having surged, folios reaching an all-time high and systematic investment plan AUM hitting fresh peaks, Vaibhav Porwal, co-founder of Dezerv, believes there is a lot of liquidity in the market and fund managers and investors are on the look out for investment opportunities where they can deploy incremental capital.
He explained that while these new listings offer fresh opportunities, investors should not invest in these opportunities purely to capture the listing gains. In a bull market, some companies list at euphoric levels due to the popularity of certain themes, which can often result in unsustainable valuations.
Porwal emphasized that one should be extremely selective when investing in these IPOs and focus on the fundamentals of companies instead of relying on popular narratives.
Rao also cautioned that before investing in IPOs, investors should concentrate on key factors including fundamentals, financial track record, cash flows, business visibility, valuations, and the quality of the company's management.
