9 FINANCEOUTLOOKINDIAOCTOBBER, 2024money from an initial public offering (IPO) may be used to pay off debt, buy out rival companies, or diversify product offerings. Companies for Special Purpose Acquisitions (SPACs): SPACs are organizations set up expressly to raise money through an initial public offering (IPO) in order to buy out or combine with an already-existing business. Features: Frequently created by seasoned investors or business leaders (sponsors) focusing on certain markets or sectors. The funds from the IPO are kept in a trust until a qualified acquisition target is found. In contrast to typical IPOs, this strives to offer a quicker path to going public.September 2024 to be India's Biggest Month for IPOs in 14 YearsThe Reserve Bank of India (RBI) stated in its bulletin that September 2024 will be the biggest month for initial public offerings (IPOs) in 14 years. This includes both mainboard and small and medium enterprises (SME) IPOs. According to the bulletin dated September 20, 2024, more than 28 firms have joined the market thus far, and 54 percent of IPO shares were sold within a week after listing. The RBI ascribed this situation to a spike in demand, including from domestic mutual funds, for SME initial public offerings (IPOs), which were characterized by significant oversubscriptions. This record is not limited to domestic use. In the first half of 20232024, India accounted for 27 percent of all IPOs worldwide, with SMEs leading the way. Additionally, India contributed 9 percent of the worldwide IPO profits. The RBI did, however, issue a warning, citing concerns that the IPO frenzy in India may allow promoters to take advantage of the opportunity to sell their assets at inflated or high prices, especially for SME shares. What actions have been made in response to these worries? The change from a proportionality-based to a lottery-based allocation mechanism, as well as other regulatory measures like the NBFC IPO funding cap, have assisted in containing the significant oversubscription rates that were observed in earlier mainboard IPOs, according to the RBI. Fostering the Fundamentals A number of advantageous fundamentals support the optimistic prognosis for IPO activity in India. India is the G-20 country with the fastest-growing economy due to investments in infrastructure, industry expansion, and consistent consumer spending. Ratings company Moody's has projected a GDP growth of little less than 7 percent for 2024. As investors reacted to China's slowing economy by diversifying their Asia-Pacific portfolios, India has also benefited from rising inflows of foreign cash. Over the past year, foreign investors have poured historic amounts of capital into India. Meanwhile, significant expansion in digital infrastructure has boosted civilian investing in Indian stocks, with the country's share trading accounts reaching a record high of about 140 million. As a result, India's mutual fund business is thriving, with mutual fund assets under management expected to increase by over 20 percent by 2023, encouraging a burgeoning middle class that is investing in stock markets. India to Become the Biggest IPO Market in the WorldAn estimated USD 6 billion worth of initial public offerings (IPOs) occurred in 2023. The figure is predicted to double by USD 12 billion by the end of 2024. Well-known businesses have previously gone public, including Ixigo, Bajaj Housing Finance, Afcons Infrastructure, and Swiggy. Strong macroeconomic conditions in India are what is driving this momentum, which is encouraging a high level of retail IPO participation. With all of these elements in place, India is well-positioned to see significant retail engagement and significant development potential.
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