The Surge of IPOs in India: A Perspective on Market Dynamics
As the Indian primary market experiences a wave of initial public offerings (IPOs), questions surrounding valuation, company quality, and market readiness have emerged. However, Aashish P. Somaiyaa, CEO of Whiteoak Capital Asset Management Company, argues that much of the criticism directed at these IPOs is unwarranted. He believes that the influx of new listings is essential for providing investors with fresh opportunities, particularly as the Indian economy continues to formalize and expand.
The Need for More Listings
Somaiyaa emphasizes the necessity of increasing the number of listings in the market. He asserts, “We have investors, we have a corpus. We need new ideas and more listings. There’s nothing wrong with that.” This sentiment reflects a broader understanding that a vibrant primary market is crucial for economic growth. As the economy matures, the demand for innovative investment opportunities rises, and new companies entering the market can help satisfy this demand.
Evolving Market Landscape
The CEO notes that the primary market’s performance is closely tied to the behavior of the secondary market and the overall economic environment. Unlike previous decades, when lesser-known companies would often seek funding through IPOs, today’s market features many well-established firms with robust governance structures, proven financial histories, and independent boards. This evolution signifies a shift towards greater accountability and transparency, which can enhance investor confidence.
Learning from the Past
Somaiyaa draws attention to the historical context of IPOs in India, particularly in sectors like insurance and asset management. Many companies in these industries have been operational for 20-25 years but only went public in the last 5-7 years. This delayed listing trend highlights the changing dynamics of the market, where companies are now more prepared and equipped to meet the demands of public scrutiny.
Embracing New Sectors
The CEO advocates for embracing a diverse range of sectors that are emerging in the Indian economy. He points to the rise of industries such as healthcare, diagnostics, import substitution, manufacturing, defense, asset management, wealth management, fintech, and consumer technology. “There will be many sectors with many businesses which will come off the scale, and we should be happy to participate,” he states. This perspective underscores the importance of adapting to new market trends and investing in sectors that are poised for growth.
Quality of IPOs: A Matter of Perception
When addressing concerns about the quality of companies entering the market, Somaiyaa acknowledges that while some IPOs may falter, the increased discussion and awareness surrounding these events do not necessarily indicate a decline in quality. He argues that the IPO landscape of the 1990s was fraught with challenges, yet lacked the level of scrutiny and engagement seen today. “Just because there is more discussion and more awareness doesn’t mean that the quality has become worse,” he explains, suggesting that the current environment fosters a more informed investor base.
Future Outlook
Looking ahead, Somaiyaa predicts a resurgence in IPO activity by late 2025 or early 2026, following a period of subdued performance in the primary markets. This optimistic outlook reflects his belief in the resilience of the Indian economy and the potential for new companies to emerge and thrive in the coming years.
Conclusion
In summary, the current wave of IPOs in India presents both challenges and opportunities. While concerns about valuation and company quality are valid, they should not overshadow the potential benefits of increased listings in a rapidly evolving economic landscape. As the market matures, the focus should remain on fostering innovation and embracing new sectors, ensuring that investors have access to a diverse array of investment opportunities. With a forward-looking perspective, the Indian primary market can continue to grow and adapt, paving the way for a robust economic future.