High valuations, increased market depth, enhanced liquidity, growing regulatory faith, and a surge in the number of expanding companies have combined to catapult India to the forefront of global IPO activity.

• India dominates global IPO market with unprecedented growth
• Shifting investment patterns fuel demand for new offerings
• Regulatory efforts enhance market attractiveness and investor confidence

The first half of 2024 saw an unprecedented milestone: One out of every three initial public offerings (IPO) globally originated from India, transforming the country into the fastest-growing and hottest IPO market on the planet.

This market momentum reached new heights in September 2024, with 41 companies submitting IPO documents – the highest number ever recorded in a single month. This surge underscores the growing appetite for public listings among Indian businesses and the increasing confidence of investors in the country's economic prospects.

Further cementing India's dominance, the country topped the global IPO market in the first eight months of 2024, with 227 transactions amounting to $12.2 billion. This remarkable performance can be attributed to robust market sentiment, a favourable macroeconomic environment, and a surge in investor interest driven by the fear of missing out. Both the Small and Medium Enterprise (SME) and mainboard IPO segments have contributed to this success, buoyed by strong demand from local retail investors and institutions.

The country’s legal markets have responded swiftly to this new normal, with more law firms launching and building up capital markets practices to get on board the IPO gravy train. Market leaders Shardul Amarchand Mangaldas & Co and Cyril Amarchand Mangaldas have in particular attracted the country’s top talent as they look to consolidate their position at the top of the table. 

GROWTH FACTORS

A significant shift in investment patterns among Indian households has played a crucial role in fuelling the IPO boom. There has been a noticeable movement of funds from traditional fixed deposits and savings accounts to mutual funds. The share of bank deposits in gross financial savings of households has declined to 29.4 percent from its long-term average of 33 percent, while the share of mutual funds has seen a substantial increase to 6 percent from a mere 2 percent. This reallocation of savings has injected considerable liquidity into the equity markets, creating a robust demand for new offerings at high valuations. 

The benchmark indices Nifty 50 and Sensex 30 are trading near their all-time highs, creating a positive market sentiment. This bullish environment has encouraged unlisted companies to file for IPOs to capitalise on favourable valuations and investor appetite. The strong performance of these indices serves as a beacon for potential issuers, signalling an opportune time to go public.

“Valuations in India are better than almost anywhere else in the world,” says Amit Singh, the Singapore-based head of Linklaters India practice and head of the firm’s South and Southeast Asia capital markets practice. 

Singh attributes this growth to a government-backed push towards stock market investment, an increased urge among India’s burgeoning middle class for wealth accumulation, and a growing number of high-quality, well-governed, new-age companies coming to the fore within the country’s tech-fuelled growth environment. 

The influx of companies backed by global private equity and venture capital funds has significantly enhanced the quality of businesses going public. These firms often bring improved corporate governance practices and operational efficiencies, making them more attractive to public market investors. The involvement of reputable PE and VC firms also lends credibility to these offerings, further boosting investor confidence.

The growing faith in India’s market regulator, the Securities and Exchange Board of India (SEBI) as a robust and proactive regulator has played a significant role in boosting investor confidence. SEBI's efforts to enhance transparency, protect investor interests, and streamline the IPO process have contributed to the market's overall health and attractiveness.

The regulator’s recent clamp-down on alleged non-compliance with listing regulations on companies such as Paytm (One97 Communications) has renewed investor faith in the listing process, leading to rising demand. 

The regulator’s approach to governance is growing more nuanced and sophisticated, with differing approaches to regulation of large companies, such as Hyundai Motors India and Bajaj Housing Finance, as compared to new-age and future companies such as Ola Electric. 

While the SEBI’s cautious approach has been adopted keeping in mind India’s retail investors, there is also a call among experts to check against overregulation, and increasing fear of document submission, creating a chilling effect on companies looking to list. 

While a cautious approach helps guard against companies not ready for the public markets, “it is important to strike a balance” between overregulation and good governance, explains Prashant Gupta, the head of capital markets at SAM. 

Regulatory scrutiny when it comes to identification of promoters and use of funds may need to be loosened to ensure smooth and quicker listings in the future, Gupta explains.

Lastly, global economic and geopolitical conditions, including the fluctuations in oil prices owing to the aggression in the Middle East and Ukraine, and the slowdown of the Chinese economy have not affected the bullish market momentum in India. This makes the country the most attractive and stable option for investors scampering to maintain growth in a declining global economy. 

India’s IPO markets have been an oasis internationally, says Manan Lahoty, head of CAM’s capital markets practice. “Despite geopolitical headwinds in West Asia, and other parts of the world, India’s IPO pipeline has not only remained unaffected, but markets have also bounced back faster than anywhere else in the globe,” Lahoty explains. 

In the last few years, Indian tech companies like Zomato and PolicyBazaar that were earlier looking at U.S. IPOs have returned to India’s bourses. The bursting of the SPAC bubble in the U.S. also strongly contributed to this turn to India, experts say. 

Companies which would have been orphaned stocks competing in U.S. markets have turned themselves into high-profile, highly anticipated listings in the Indian market, explains Gupta. 

The market is attracting not only domestic companies but also international companies that were previously looking to list in other more mature international capital markets. 

“In some instances, even companies who have a substantial business outside India are thinking of reorganising the business under the subsidiary and looking at an IPO,” Singh explains. 

MORE LEGAL WORK

The increasing depth of the IPO markets means a growing demand for legal advisors in India, allowing top firms to pick and choose their mandates, creating a larger opportunity for new firms to enter the capital markets game. 

Leading the race are India’s top firms SAM and CAM, advising on key marque IPOs in the market including Hyundai Motors, Ola Electric, Swiggy, FirstCry, Ather, and Premier Energies. 

While SAM maintains a strong organic growth trajectory, CAM has successfully rebuilt its capital markets practice this year with a 60-member team from IndusLaw led by Manan Lahoty, following the departures of practice leader for South India Vijay Parthasarathi and partner Vinay Sirohia to Trilegal. Large parts of their teams, while not moving directly with the lead partners, also found new homes. Partner Abhinav Kumar left to join Talwar Thakore & Associates, while Rohit Tiwari moved to SAM.

With Lahoty leading the newly-build capital markets practice and industry leader Yash Ashar still at the firm, CAM maintains a business-as-usual demeanour, with a pipeline of IPO mandates leading into the coming year. 

“There is an increasing demand for capital markets lawyers in the Indian markets, particularly among tier two firms”, explains legal market recruitment expert Khushboo Luthra. 

Firms that have a large base of early-growth clients are looking to bulk up their capital market practices in order to offer listing services to these clients when they decide to go public, she explains. 

This includes making partners out of principal associates and counsels at Tier-1 firms to attract the country’s top talent to their firms. 

As the SME IPO market grows, smaller firms such as SNG & Partners and Fox & Mandal are getting into the act, building capital market capabilities to lead smaller IPOs. 

Firms including Economic Laws Practice, Talwar Thakore & Associates, Bharucha & Partners, Saraf and Partners, and Chandhiok & Mahajan have launched and bolstered their capital markets practices this year to get a larger chunk of the IPO pie.

International law firms such as Linklaters, Latham & Watkins, Sidley Austin and Hogan Lovells have also been growing their capital markets groups they vie to be the top international advisors for bookrunning lead managers on Indian IPOs. 

While large Indian IPOs with strong foreign institutional investor interest engage two international counsel, smaller ones that are sold internationally usually make do with just one. 

International counsel are engaged to ensure compliance with U.S. securities laws which is necessary from a foreign institutional investor perspective, who will need to make appropriate disclosures to their regulators.

“While Linklaters has been active in the India jurisdiction for several decades, the firm has a renewed focus on India in an effort to be at the leading edge of the country’s growth,” Singh says. 

“We have also recently hired a private equity-focussed partner to our Singapore office, whose clients have already sent us portfolio companies for IPO. In addition, at the associate level, we have made several hires, including lawyers with Indian educational or law firm backgrounds, to help us meet the very high demands for service that we are seeing,” Singh adds.

FUTURE OUTLOOK

Despite the overwhelmingly positive trends, dealmakers and legal experts maintain a cautious outlook. Many anticipate a potential market correction and believe that the current IPO frenzy may not be sustainable in the long term. However, the prevailing sentiment among industry professionals is to capitalise on the current favourable conditions while they last.

A big concern for experts remains the listing of less-promising companies looking to take advantage of the bull market to access public finance through listings, a practice that has got SEBI working overtime to regulate. 

“In recent years, the headline story for India was the emergence of its IPO market on the global stage. In my view, we are now past that phase – going forward, market observers will take for granted India’s acceptance on the global stage and instead watch its development as an equal competitor to other global IPO markets, as well as track the strength of the Indian corporate pipeline.” 

• Amit Singh, Linklaters

Despite concerns, strong regulatory scrutiny and a push towards retail investment is keeping India at the forefront of public listings in the coming year. Legal experts are seeing more companies in the technology, consumer, infrastructure, healthcare and real estate space looking at listings in 2025. 

“In recent years, the headline story for India was the emergence of its IPO market on the global stage. In my view, we are now past that phase – going forward, market observers will take for granted India’s acceptance on the global stage and instead watch its development as an equal competitor to other global IPO markets, as well as track the strength of the Indian corporate pipeline,” says Singh.

Much of that depends in turn on macro and India-specific economic policy and growth. For now, though, India and its IPO market has more momentum than we have seen in perhaps decades, and we expect that energy to continue into 2025,” Singh adds.