Fundraising Boom in India: A Two-Year Forecast
As India stands on the brink of a fundraising revolution, the next two years are poised to witness unprecedented levels of capital mobilization. This surge is driven by a confluence of factors, including the ambitions of conglomerates, technology firms, and financial services providers seeking expansion capital. At the same time, many owners are seizing the moment to divest their holdings, creating a dynamic landscape for investors and companies alike.
A Shift in Market Dynamics
Debasish Purohit, co-head of investment banking at Bank of America Corp. in India, has provided insights into the evolving market dynamics. He anticipates a significant shift in fundraising trends, moving away from the block trades that characterized 2023. Instead, the spotlight is expected to shine brightly on initial public offerings (IPOs) in 2024, with this momentum likely extending into 2025. Purohit projects that these two years will be among the most active for IPOs in recent memory, with estimates suggesting that between five and ten tech firms, along with two or three local subsidiaries of multinational companies, will make their public debut.
Major Players Set to Go Public
The IPO landscape is set to be dominated by prominent players such as Reliance Industries Ltd. and Tata Sons’ financial services unit. Reliance, in particular, is gearing up to list its wireless carrier, Reliance Jio Infocomm Ltd., alongside Reliance Retail Ventures. This anticipated activity is underpinned by the robust performance of India’s equity markets, exemplified by the benchmark Sensex, which has shown an eight-year upward trend. The expanding retail investor base further enhances the favorable conditions for IPOs, providing lucrative exit opportunities for existing investors.
Economic Growth and Global Interest
The International Monetary Fund (IMF) projects a commendable 6.5% growth in India’s economy for 2024 and 2025, adding to the optimism surrounding fundraising activities. As China grapples with its own economic challenges—ranging from stock and property market instability to regulatory crackdowns and trade conflicts—global investors are increasingly redirecting their focus toward India. Purohit notes a growing interest from private equity funds adopting a “China plus strategy,” which positions India as a viable alternative for investment.
India as a Standalone Market
Purohit emphasizes India’s appeal as a standalone market rather than merely an extension of the broader Asia Pacific region. He identifies Japan and South Korea as potential sources for inbound deals across various sectors, including real estate, infrastructure, manufacturing, and financial services. Additionally, Taiwan may play a crucial role in investments in local semiconductor businesses, further diversifying the investment landscape.
Mergers and Acquisitions: Key Opportunities
In the realm of mergers and acquisitions (M&A), Purohit identifies several key areas ripe for activity. He highlights the potential for partnerships between founders of Indian companies and financial sponsors to stimulate growth. Furthermore, exits or asset sales driven by sector consolidation or family decisions are expected to gain traction. Purohit underscores the attractiveness of these areas, noting that securing 7% to 8% of the fee pool would position entities favorably in the competitive market.
Conclusion
As India gears up for a fundraising boom over the next two years, the landscape is set for transformative changes. With a robust economic outlook, a thriving IPO market, and increasing global interest, the stage is being set for unprecedented opportunities. Companies and investors alike must navigate this evolving terrain with strategic foresight, capitalizing on the favorable conditions that are emerging in one of the world’s most dynamic economies. The coming years promise to be a pivotal chapter in India’s financial narrative, one that could redefine the contours of investment and growth in the region.