India secures top position in global IPO arena

India has been the star performer in the initial public offering (IPO) market and according to a report, the Indian stock exchanges—BSE and the National Stock Exchange (NSE)—have emerged as global leaders in IPOs for 2023.

According to the Q4 IPO Trends report by global consulting major EY, India’s stock exchanges have secured the top position worldwide in terms of the number of IPOs.

The primary markets recorded 31 IPOs (including one InvIT) in Q4 of 2023, marking a significant uptick compared to the same period in 2022 and the Q3 of 2023. This represents a robust 72% increase over Q4 2022 and a substantial 41% increase over Q3 2023.

Similarly, the Small and Medium Enterprises (SME) segment showcased a strong growth, witnessing 61 IPOs in Q4 2023, as compared to 34 and 47 IPOs in Q4 2022 and Q3 2023, respectively. This is a 79% and 30% increase compared to Q4 2022 and Q3 2023, respectively.

“Looking ahead to Q4FY24, the Indian IPO market is anticipated to continue its upward trajectory, buoyed by optimistic investor sentiment, a robust economy, and expectations of lower inflation and rate cuts in 2024,” said Adarsh Ranka, Partner and Financial Accounting Advisory Services Leader, member firm of EY Global.

“This positive environment is expected to fuel further growth in both the number and average size of mainboard and SME IPOs,” he added.

Incidentally, the fourth quarter of 2023 emerged as the standout period of the year, accounting for nearly 40% of the total listings in 2023.

Following a slow start in the first half of the year, there was a significant surge in IPO activity during the second half, with over 18 companies filing their Draft Red Herring Prospectus (DRHPs) in Q4 2023, signaling a potentially brighter outlook for 2024.

From a sectoral perspective, the power & utilities, health, automotive & transportation, and banking & capital markets sectors have emerged as the most active, based on recent DRHP filings.

Furthermore, the recent amendment by Sebi to the Real Estate Investment Trusts Regulations, 2014, facilitating the creation of Small & Medium Real Estate Investment Trusts (SM REITs), is poised to spur further growth and innovation in the market.

In Q4 2023, consumer products & retail, diversified industrial products, automotive & transportation, and technology sectors were particularly active, accounting for 21, 14, 9, and 9 IPOs, respectively, across main and SME segment.