'Less is more ' IPO helps primary market

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Apurva Dhamankar

1/24/20242 min read

2023 was not your typical rollercoaster ride in the Indian IPO market. Forget the dizzying heights of 2021 with this unicorn frenzy and nosebleed predictions. This year, the mainstream market took a big step and prioritized quality over quantity, and the results are surprisingly promising.

While the number of IPOs flirted with the peaks of 2021, the capital raised decreased significantly, almost by half compared to last year. But that was not a sign of weakness; It was a deliberate change driven by three main factors. First, diversity has become the new mantra. Gone are the days when a handful of tech darlings dominated the IPO landscape.

The 2023 buffet offered investors a diverse selection from manufacturing and pharmaceutical giants to innovative projects in green energy and healthcare. This diversification has meant a healthier spread of investor interest, preventing the FOMO frenzy that once plagued the market.

Second, the bubble of mega mania burst. Remember those huge IPOs that sent valuations into the stratosphere? 2023 grounded them with a reality check. Companies were judged on their true potential, not hype. It has brought much-needed sanity to the market, ensured smoother price movements and attracted long-term investors who value sustainable growth over overnight wealth.

Third, regulators put their hats on responsible adults. They tightened up the IPO game and stifled the pump-and-dump schemes of speculators looking for a quick buck. This meant stricter screening processes and fairer allocation procedures that protected both companies and investors from volatile fluctuations and unrealistic expectations. This shift to quality is not based solely on certainty. it was about creating a stronger and more sustainable primary market for the future.

This attracted institutional investors who brought stability and long-term commitment, promoting sustainable value creation for all stakeholders. However, the positive effects of this measured approach extend far beyond the mainstream market. In a less frothy IPO landscape, the appetite of Indian households for equity investments is growing. This inflow of domestic capital can act as a powerful growth engine, fueling the companies that raise money through an IPO.

Recognizing this change, the government wisely reduced its investment targets, freeing up vital capital for the private sector on the brink of recovery. If tax revenue growth and spending control are expected to keep public finances in check, IPOs could become a key indicator of recovery in private investment. And what about the banks? A stronger IPO market with quality companies could boost demand for industrial loans. This is good news for banks desperate to revive business lending, as consumer credit growth driven by non-essential purchases could become self-limiting. RBI, ever vigilant, has been proactive in managing consumer credit concentration risks. Leveraged corporate balance sheets can further mitigate the risks associated with aggressive private lending. In short, 2023 and quot; less is more quot; Approaching an IPO may seem like a quiet year on the surface. But under peace, a revolution is born. A revolution that prioritizes quality over promotions will drive sustainable growth and pave the way for a more inclusive mainstream market that will fuel the Indian economy. This revised version expands on the original passages without repeating them and adds insight and context to the story. It also explores the wider economic implications of a metered approach, highlighting potential benefits for domestic capital, private sector recovery, and bank lending. By weaving together these elements, the blog creates a more comprehensive and nuanced picture of the Indian IPO market year after year.


Thank you.

Regards,

Anuraag Sathyan,

Kautilya, IBS Mumbai.

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