India's IPO Surge: Investor Confidence Amid Political Buzz

India's IPO market thrives amid political buzz, reflecting investor faith in the economy. Potential for a record third term for PM Modi fuels optimism.

Bhakti Kothari
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India could see a surge in foreign investors in the near future as the good show of small initial public offerings is likely to lead to bigger deals. Around 10 companies have been considering offerings that are over $100 million, data compiled by Bloomberg says.

Prime Minister Narendra Modi should return to office for a record third term, the political buzz suggests, and investors in turn have expressed confidence that markets will regain top form soon. Recently, Indian stocks had faced a brief stint of uncertainty owing to the ongoing general election although stable fundamentals in the domestic scene managed to buoy the markets.

Many industry watchers feel the big global players have taken a wait-and-watch stance during the ongoing polls, and they should return to India for big investments once the election results are out on June 4. A clear picture of political stability should erase notions of doubt among investors.

Factors to influence market resurgence include earnings that have outdone estimates and the country’s steady economic growth. Small shares, meanwhile, continue to shine and sustain India’s position as one of the busiest IPO markets in Asia. However, for India to continue drawing major foreign investment, it is vital that the big public offerings perform well consistently at a global level.

Among significant international brands that currently lead the way is Citigroup Inc., which has emerged as the top equity offerings arranger in the country this year. The group sees around five IPOs of at least $1 billion each over the next year, according to media reports.

The key investments in IPOs during this phase have come from mutual funds that witnessed over $2 billion of flows coming through monthly investment plans. Overall, India has so far seen a 72 per cent increase in IPO proceeds to scale $3.4 billion this year, according to Bloomberg data. In the process, India has beaten Hong Kong and South Korea in terms of IPO proceeds.

Mid-size shares that have made impressive debuts this month include the low-income housing finance company Aadhar Housing Finance, the pharmaceutical firm Indegene and the travel portal TBO Tek.