Mumbai Emerges As Global IPO Powerhouse, Outshining Chinese Market: Reports

Mumbai is all set to steal the spotlight as the global leader in new stock market listings this year, leaving behind the even major Chinese financial centres. According to predictions from global consultancy EY, the number of initial public offerings (IPOs) on the National Stock Exchange and the Bombay Stock Exchange in Mumbai are expected to surge by 45% year-on-year, reaching 209 IPOs.

This surge in IPO activity not only underscores the strength of India's economy but also reflects the government's concerted efforts to drive new infrastructure projects and the growing enthusiasm of Indian investors for equities, as noted by industry analysts. While Indian exchanges may still trail their Chinese counterparts in terms of IPO proceeds, the sheer volume of new listings is on track to outpace even financial hubs like Hong Kong this year.

One factor contributing to Mumbai's rise as an IPO hub is China's sluggish recovery following the easing of COVID-19 restrictions. As of December 4, India's benchmark Sensex stock index has witnessed a robust 13.2% gain on a year-to-date basis, outshining China's benchmark CSI300, which has seen a 10.4% decline. Hong Kong's Hang Seng index has experienced a substantial loss of 16.5% during the same period.

The contrast between the IPO markets in India and Hong Kong is notable. Hong Kong, once the preferred gateway for foreign investors eyeing China's economic prospects, has faced headwinds due to rising tensions between the United States and China, concerns about the mainland economy, and Chinese restrictions on outward investment. Alibaba's decision to postpone the listings of Alibaba Cloud and Hema Fresh has further resulted in a blow to Hong Kong's IPO landscape.

China's IPO numbers have also taken a hit since late August when the mainland securities regulator imposed restrictions on new share offerings in a bid to revitalize the sluggish stock market. In November alone, the number of IPOs slipped to 17, down from 33 in August.

In contrast, India's IPO activity is all heated up, fueled by businesses eager to go public before general elections scheduled for May next year. Notable success stories include JSW Infrastructure, the country's second-largest commercial port operator, which raised Rs 2,800 crore ($336 million) in a share offer oversubscribed 37 times in September. Cello World, a plastic products manufacturer, and Campus Activewear, a shoemaker, also witnessed oversubscriptions 69 and 52 times, respectively.

Even unconventional sectors are making waves in the Indian IPO arena. Mankind Pharma, a maker of condoms and pregnancy test kits, became the country's largest public flotation this year, selling Rs 4,360 crore of shares in an offer oversubscribed 15 times in May.

A lineup of richly valued startups, including electric scooter maker Ola, food delivery giant Swiggy, babycare retailer FirstCry, and eyewear retailer Lenskart, are gearing up for IPOs next year. According to Prime Database, a primary markets research agency, 40 companies are awaiting market regulator approval, with their cumulative values estimated at a staggering 431.5 billion rupees.

This surge in equity investments in India reflects a gradual rise in income levels over the past decade, coupled with a decline in interest rates on small savings schemes. Government data, analyzed by Nikkei Asia, reveals that small savings schemes have seen a decline of up to 20% in the past decade. During the same period, the Sensex index surged by an impressive 250%, overshadowing the appeal of real estate investments affected by higher taxes, slower appreciation in value, and low rental yields. The emergence of financial startups like Zerodha and Groww has also played a pivotal role in encouraging investors to explore equity returns through direct trading or mutual funds.