Will India’s IPO volumes set another record in 2025?

Last year, the volume of equity deals in India including IPOs reached a record $70 billion — second only to the US. IPOs made up around $19 billion of this volume, with an average deal size of $275 million. As many as 11 IPOs were priced at above $500 million.

As young Indian companies mature and go public, they’re meeting a swelling populace of Indian investors — “a perfect storm” of factors that is boosting the Indian markets, according to Sudarshan Ramakrishnan of Goldman Sachs Global Banking & Markets. Three-quarters of the capital funding the 2024 IPOs was domestic, compared to a quarter three years earlier.

We spoke to Ramakrishnan and Dev Nambakam, co-heads of investment banking for Goldman Sachs in India, about India’s active capital markets, the depth of the domestic investor base, and their outlook for Indian IPOs in the near future.

What are the factors driving the surge in Indian IPOs?

Sudarshan Ramakrishnan: We’re coming off the strongest year for Indian equity capital markets. We saw around $70 billion in deal volumes in equity capital markets in 2024, up from around $20 billion in 2022. The 2024 figure is a record high for India. I think there are three big factors behind this.

One is that a lot of young companies are coming to market. All of them have created value in the private markets, and their profitability and growth suggest they’re ready for the public markets. Second: A lot of these have been funded by financial investors in the private markets, across private equity funds and a bunch of capital funds in general. Now it’s time for these PE and capital funds to get liquidity in the public market. And third: it’s a kind of perfect storm in terms of the deepening of the investor base in India.

Dev Nambakam: Of course, the bedrock for all of this is: India is seen as a politically stable growth economy. In today’s world, compared to a lot of other countries, you can say that more confidently about India. 

Could you give us a more detailed view of what has been happening with that investor base?

Sudarshan Ramakrishnan: If you look at the last three years, domestic investors have invested around $130 billion in Indian companies. Domestic capital formation has created a market where issuers of capital and investors of capital can really coexist — alongside, of course, foreign investors who keep coming in and out of the market as well.

The Indian private markets came of age five or ten years ago, but there was always this question around whether India will be a good market to provide liquidity to private investors. I think that’s been proven. So, of the $70 billion or so of deal activity that we saw last year, close to $30 billion was pure secondary sell-downs in the market. We participated in around $5 billion of that, in which listed companies with established track records and shareholders in those companies created liquidity for themselves.

Foreign investors over the last three years have made a net investment of zero dollars into the markets, yet the markets have continued to rally. If you were to unpack the foreign investment angle as well, they’ve invested $15 billion in primary issuances but taken money out of secondary markets, which is a healthy sign. It shows the rotation of capital coming in and going out. And any market, as it matures, needs domestic capital to support the inflow and outflow of foreign capital. That’s happening, which is very helpful.

Also, 10 years ago, every Indian tech company had to think of going public in the US, not in India. I think that has gone out of the window. All the unicorns are thinking of Indian IPOs. Even companies that were incorporated in the US are now domiciling in India so that they can go public here. That’s because you have a growing number of tech investors in India. 

Dev Nambakam: To speak to why domestic liquidity has improved, let’s take a situation from even three years ago, in the 2021 IPO boom versus now. More than three-quarters of the capital that funded those IPOs was international capital. About a quarter was domestic. Today, it’s the reverse. In those two-three years, you’ve seen domestic mutual funds grow massively in assets under management, which is driven again by the fundamentals of the economy. People are putting their savings into mutual funds, and mutual funds are thinking of equity markets as a place to invest. That’s driving domestic liquidity — and we think this liquidity should be sustainable. Even if there is a correction in valuation, foreign capital won’t just pull out of India and domestic capital has nowhere else to go. They’ll continue to invest, so liquidity is here to stay.

What is the mix of sectors involved in these IPOs? Is tech a dominant player?

Dev Nambakam: Three years ago, it was tech, tech, and tech. Off the back of the Covid pandemic, tech companies did exceptionally well. Most traditional industries went the other way. Today, you have a huge number of tech and new-age companies listing in India, but the mix has become more balanced because you have traditional sectors such as financial services, industrials, consumer goods, and asset-heavy businesses like renewable energy or infrastructure. That is again a very healthy sign of all good companies finding solutions in the capital markets. 

Do you expect this momentum to continue into 2025?

Sudarshan Ramakrishnan: Structurally, we feel very good about the long-term growth of India. The pipeline of companies waiting to go public is huge. Obviously you need markets to be supportive, and that is not dependent only on what is going on in India. We live in an interconnected world. I’d say over the next three-five years, we feel volumes will continue to grow.

Dev Nambakam: We get asked this question a lot: “Is this energy the result of a diversion of capital from other countries where it’s becoming harder to invest? Is that the only thing that is driving?” But there is a standalone case to be made for India to be deserving of the capital it gets. Does it help when other parts of the world become less attractive? Absolutely. But are we depending on other parts of the world underperforming? Definitely not.

So a resurgence in Chinese equity markets activity would not necessarily pose a threat to Indian market activity?

Dev Nambakam: It may take away some capital — capital that was looking purely for safety and to avoid riskier jurisdictions. But only foreign capital can move in and out of Indian markets easily, and that is about 20% of the Indian IPO funding today. That’s the limited change you might see, if at all. But the bulk of the capital fueling liquidity today is domestic capital. That doesn’t depend on whether China does well or not.

How are high valuations impacting IPO activity?

Sudarshan Ramakrishnan: I don’t think they’re impacting IPO activity. I think India has always been viewed as a market that has traded expensively compared to most of its emerging market peers. That premium multiple has always existed. The supportive valuation environment has spurred issuer activity. A lot of the unicorns who were thinking of going public in the US switched to India because they felt India supported a better valuation. You had global majors who took their Indian companies public in India. India has been trading at a 25x price-to-earnings multiple and we had $70 billion in equity capital markets activity last year, after all. Investors are quite happy investing in growth, and the valuations are supported by a lot of really good companies that are growing structurally.

How does this Indian IPO activity compare to what’s happening elsewhere in the world?

Dev Nambakam: Across emerging markets, definitely for a while now, India has been seen as the stable market from a geopolitical perspective. That has an impact on growth and GDP. Compared to Europe, Indian growth is stable and high, and will be for the foreseeable future. On an absolute basis, the Indian economy’s metrics are quite attractive; on a relative basis, even more so. If you compare it to the US, from a dollar perspective, the US markets are much bigger, no question about it. But India’s growth rate is better than the US and provides a longer runway for growth. 

 

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