2024: The year India turned IPOs into a national obsession

With retail investors signing up for nearly every offer that was made to them, 2024 will be remembered as the “year of the IPOs”. As a result of this investor enthusiasm, 81 firms, or roughly seven IPOs per month, tapped into the capital markets this year, raising Rs 1.54 lakh-crore.

Investors were so eager to subscribe for initial public offerings (IPOs) that Resourceful Automobile, a small two-wheeler dealership in Delhi, launched an IPO in August to raise just Rs 12 crore at a fixed price of Rs 117 per share. However, it was oversubscribed 400 times, drawing bids totalling Rs 4,800 crore. Analysts flagged concerns about the auto dealer’s weak business strategy and negative cash flows, but the overwhelming amount of investor interest overshadowed these concerns.

This incredible performance indicates a larger trend in Indian markets, where even small, obscure businesses may capitalise on investors’ collective confidence. Growing retail engagement, easier access to capital markets, and a desire for high-growth possibilities at any scale are the main drivers of this phenomenon.

The Hyundai case

At the opposite end of the spectrum was Hyundai Motor India Ltd.’s (HMIL) historic IPO, which raised an incredible Rs 27,870 crore, the highest ever in Indian history. However, HMIL’s path has not been entirely straightforward; by the middle of December, its stock was trading at a 7.24 per cent discount to the offer price.

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The market’s reaction highlights a difficult fact about large-cap IPOs: excessive investor expectations and exaggerated prices can significantly impact post-listing performance. However, analysts questioned the IPO’s feasibility even before it was issued.

“The Hyundai IPO will suck liquidity out of the market as it is very large... you’re looking at Rs 31,000–32,000 crore being drained from the market,” Mayuresh Joshi, Head of Equity Research at William O’Neil, had remarked.

Swiggy’s solid business plan

Swiggy, the massive food delivery service, also made its eagerly awaited debut this year. The company launched at a 7.69 per cent premium, raised Rs 11,327 crore, and, unlike HMIL, gave investors quick returns. Since then, Swiggy’s stock has increased consistently, indicating that the company has a solid business plan and can successfully negotiate the fiercely competitive tech-driven meal delivery market.

With NTPC Green Energy’s Rs 10,000-crore IPO, renewable energy also gained attention. The company’s market capitalisation has subsequently crossed Rs 100,000 crore, despite its modest listing gains at only 3 per cent. This indicates that investors are becoming more committed to enterprises that prioritise sustainability.

Watch | Swiggy IPO: Is the stock whetting investors' appetite?

However, lesser players were the ones who got to enjoy the genuine fireworks. The market was taken aback by Vibhor Steel Tubes Ltd.’s astounding listing-day rise of 195.53 per cent, followed by Jyoti CNC Automation Ltd.’s 291 per cent and KRN Heat Exchanger & Refrigeration Ltd.’s 257.68 per cent. These outstanding results highlight how specialised businesses and narrow markets can entice investors looking for exceptionally high returns.

Wild range of investor attitude

Strong domestic inflows, increased retail involvement, and active FPI engagement have all contributed to the fundraising momentum in India, according to V Prashant Rao, Director & Head of ECM at Anand Rathi Advisors. But despite early excitement during subscription phases, the SME IPO market still shows a range of investor attitude, with issuers seeing differing results.

Boss Packing Solutions, a relatively unknown business, also attracted investors’ interest. Boss Packing Solutions shocked the market by obtaining an incredible 135x subscription for its first IPO, despite its small size, consisting of only 64 people and a less-than-attractive office setting. The company, which provides packaging, labelling, capping, and filling gear, received bids totalling an astounding Rs 1,073 crore for an issue size of Rs 8 crore. This intense attention demonstrates the allure of specialised industrial firms in the SME market, especially those with distinctive products in a developing industry.

On the other hand, MVK Agro Food Product’s March 7 listing on the NSE Emerge platform was lacklustre. The shares’ initial price of Rs 79 represented a significant 34.2 per cent decrease from the IPO price of Rs 120. The stock has declined even more, dropping 20 per cent in three months.

Also read: Hyundai Motor India’s IPO: A missed opportunity for direct investment?

The dangers of overvaluations

This decrease emphasises the dangers of overvaluations and how crucial post-listing performance is to investor trust. However, while businesses such as Boss Packing Solutions have received enormous IPO subscriptions, maintaining investor interest after listing is the real challenge. This discrepancy frequently indicates that investor expectations and market fundamentals are not aligned.

Therefore, industrial niche businesses like Boss Packing Solutions may benefit from a defined and targeted company plan. On the other hand, industries like agro-food and electric vehicles can come under investigation because of rivalry or market uncertainty.

A few others, such as Kalana Ispat and MVK Agro Food, have underperformed, which emphasises how critical reasonable prices are to a successful IPO and strong post-listing performance.

View for 2025

Due diligence and sectoral insights are still crucial for investors to navigate this ever-changing market. Despite a few setbacks, such as HMIL’s difficulties after listing, the overall picture is still one of unrestrained optimism. According to statistics gathered from multiple outlets, by mid-December, about 72 per cent of the IPOs introduced in 2024 were trading at an average of 69 per cent above their offer prices. These public offers have produced enormous amounts of cash.

While holding on to interests currently valued at Rs 4.8 lakh crore, the promoters combined realised Rs 26,827 crore in cash. A staggering Rs 1.58 lakh crore of this income came from the manufacturing sector alone, confirming its position as a key component of India’s economic success. This IPO craze reflects a developing industry with many prospects, from manufacturing to renewable energy and technology to even small motorcycle dealerships.

What are the prospects for companies going public and for individual investors in 2025? The issuance activity in 2025 is anticipated to surpass Rs 2.5 lakh crore, or roughly 66 per cent more than what was raised in 2024, according to Munish Aggarwal, Managing Director and Head of Equity Capital Markets at Equirus, based on the 75 IPO documents that are at various stages of approval/marketing and the deal pipelines.