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How India's major corporate groups are cashing in on the IPO frenzy

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As the stock market hits record highs, it's not just small businesses but also the country's largest corporate groups that are making their way to the primary market.

In 2023, JSW initiated the trend when its logistics and infrastructure venture JSW Infrastructure raised Rs 2,800 crore through fresh equity capital from JSW Energy, 14 years after the group's last listing.

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Then it was Tata Technologies in November 2023 and now Bharti Hexacom, which launched its IPO on April 3 with an issue size of Rs 4,275 crore.

Tata Technologies, JSW Infrastructure and the Bharti Hexacom offering are just a few examples of Indian conglomerates making the most of the IPO market dynamics. The primary market was buoyant last year and 76 motherboard issues fetched Rs 61,915 crore.

Indian Conglomerates: The IPO March

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Tata Technologies' IPO was the Tata Group's first in 19 years and the last Bharti Group company to list was Indus Towers in 2012.

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However, more industry heavyweights are expected to take their companies public to unlock value and raise more funds. Tata Group is reportedly planning to raise several public issues in the next few years.

Tata Capital, Tata Autocomp Systems, Tata Passenger Electric Mobility, BigBasket, Tata Digital, Tata Electronics, Tata Housing and Tata Batteries are among the companies likely to be listed.

On March 29, diversified conglomerate and Shapoorji Pallonji Group-backed construction and engineering major Afcons Infrastructure filed its DRHP with SEBI to raise an issue of Rs 7,000 crore.

Reliance Industries' Reliance Retail is also preparing for an IPO. Mukesh Ambani had already said in 2019 that the retail arm of his corporate empire would seek an IPO in five years. In 2023, Qatar's sovereign wealth fund invested $1 billion in India's largest brick-and-mortar retailer.

Why the sudden rush?

Speaking to Moneycontrol, Gaurang Shah of Geojit Financial said that a key factor that has a positive impact on primary market sentiment and companies getting listed is the pursuit of value creation. The drive to create value benefits both project sponsors and investors.

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According to Vinit Bolinjkar of Ventura Securities, there is high demand for quality companies in the market. Since large conglomerates like the Birla, Tata and JSW groups have decades of experience, brand recognition and fiduciary expertise, there is a lot of interest among investors in these companies.

Companies that bring their issues onto the market are extremely well received on the stock exchanges. The average stock market appreciation rose to 29 per cent in FY24 compared to 9 per cent in FY23 as domestic institutional investors, HNIs and retail investors took advantage of the IPO boom.

According to primedatabase.com, the value of shares applied for in the retail segment stood at Rs 1.95 lakh crore in FY24. This was 216 percent higher than the total IPO mobilization during the fiscal year.

Bolinjkar added that the market, especially large investors, has plenty of cash waiting to be deployed in the market. “Pro-equity sentiment has taken over,” he quipped. “Companies that want to expand and need growth capital rely on equity instead of debt. After all, it’s much cheaper.”

India story that whets the appetite?

Another reason for the positive mood is the expectation of the Modi government being re-elected. The government's push to promote manufacturing and the Make-In-India initiative has led to many countries trying to facilitate manufacturing in India, Shah added.

The narratives surrounding India's growth cycle have fueled demand for quality investments. With the stimulus and increasing investment push, markets are poised to continue their outperformance, resulting in positive sentiment across all sectors. That should keep the IPO gravy train going.

Disclaimer: Moneycontrol is part of the Network18 group. Network18 is controlled by the Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com recommends users to check with certified experts before making any investment decisions.

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