4 Asian Legal Business | October 2024 Cover Story location 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
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