India's IPO market rebounds with successful listings of Ola Electric and FirstCry

India's initial public offering (IPO) market is experiencing a significant resurgence, as evidenced by the recent successful listings of e-bike maker Ola Electric Mobility and baby products e-commerce firm Brainbees Solutions, better known as FirstCry. These triumphs mark a turning point for India's capital markets, which had previously been marred by underperforming tech IPOs.

Ola Electric's shares have surged an impressive 42% above their IPO price since debuting on Friday, while FirstCry achieved a remarkable 46% gain after just one day of trading on Tuesday. Collectively, these deals generated proceeds of USD 1.2 billion, reinvigorating investor confidence and potentially clearing the path for larger offerings in the near future.

The success of these two loss-making companies, both backed by SoftBank, is particularly noteworthy given the recent history of high-profile tech firms struggling post-IPO. The most notable example is One97 Communications, owner of fintech company Paytm, which is currently trading 76% below its 2021 offer price.

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This turnaround can be attributed, in part, to more conservative pricing strategies. Ola Electric, for instance, priced its offering at the top of the indicative range, but at a USD 4 billion valuation – a quarter below the figure set in a previous funding round. This approach ensured strong demand from both foreign and local investors, including sovereign wealth funds.

The success of these IPOs has propelled India to the top of Asia's league tables for capital raising. Year-to-date, India has raised USD 7.3 billion from IPOs, nearly matching its entire 2023 total. This figure surpasses Hong Kong's USD 2.5 billion and China's USD 4.9 billion, according to data from Dealogic. Even when including follow-on issues, secondaries, and convertibles, India's total of USD 34 billion outpaces its regional competitors, though it still falls short of Hong Kong's peak years.

This positive momentum sets an encouraging tone for upcoming listings, including the anticipated USD 3.5 billion IPO of Hyundai Motor's Indian unit. It may also prompt other high-profile companies, such as the Prosus-backed food delivery firm Swiggy, to accelerate their listing plans. Additionally, tycoon Mukesh Ambani has promised IPOs for the telecom and retail units of his USD 236 billion conglomerate, Reliance Industries.

The resurgence of India's IPO market is not without challenges, however. Bankers working on future deals will need to strike a delicate balance in pricing offerings to ensure they don't leave excessive value on the table while still attracting strong investor interest.

India's IPO success story is unfolding against a backdrop of global economic uncertainty and geopolitical tensions. The country's ability to maintain this momentum will depend on various factors, including economic growth, regulatory environment, and global market conditions.

For international investors, India's revitalised IPO market presents both opportunities and risks. While the recent successes are encouraging, the performance of previous high-profile listings serves as a reminder of the inherent volatility in emerging markets.