It’s been a record-setting year for India’s IPO market, and law firms have reaped the benefits, representing issuing companies and lead managers. And the party isn’t expected to end any time soon: Lawyers believe there is a lot more is to come in 2024 despite the upcoming general elections. 

 

India’s initial public offerings market in 2023 was a tale of two halves. Bogged by the underperformance of companies listed in 2022 and general investor caution due to global market slowdowns, the first half of the year saw little traffic on India’s bourses. Then a condom-maker came in and changed the game.

Mankind Pharma’s $530 million listing, which remained the biggest in the year, opened the floodgates to make 2023 a record year in terms of number of IPOs. The stock was oversubscribed 15 times its issue price, renewing investor outlook and confidence in the market, and giving capital markets lawyers a busy second half of the year.

U.S. law firm Sidley Austin’s Singapore-based capital markets partner Manoj Bhargava, who advised the lead managers on Mankind’s IPO, said the listing “sent a positive signal to the market and triggered a flurry of other IPOs.” This tidal wave of IPOs peaked in Q3 of 2023, with India emerging as a global leader in the number of listings. Dalal Street – Mumbai’s version of its more famed New York cousin, also known as D-Street - recorded a staggering 21 IPOs worth $1.77 billion on mainboards, compared to just four in the same quarter of 2022, an EY report found. The small and medium enterprises (SME) segment also recorded significant success by raising $165.76 million via 48 IPOs in Q3 2023, the report said.

This momentum continued through the end of the year. All told, India saw 57 IPOs on the mainboard, the second highest in the country in a decade, and “one of the highest of any single market in the world,” Bhargava said.

Sidley Austin, which has grown its presence in the Indian capital markets space in the last few years, advised on eight mainboard IPOs in 2023, taking its tally to 29 in the last three years.

BRIGHT SPOT

Indeed, more international law firms are looking at India for IPO work in the coming years, owing to its resilient performance despite a general slowdown in global listings.

“While we don’t compete with Indian law firms because we do not practice Indian law, we are seeing a greater number of international law firms entering the India IPO market,” Bhargava says.

His bullish view is echoed by Rajiv Gupta, a capital markets lawyer at U.S. law firm Latham & Watkins, which has advised on a number of Indian IPOs this year, including 2023’s marquee $366 million Tata Technologies listing. “Even though the global markets were slow, India remained a shining star with stable and attractive markets,” he says. PwC’s global IPO report found that India’s $5.9 billion worth of IPOs was third globally in respect of IPO proceeds raised in 2023, behind only China and the U.S., reflecting a shift in the sources of capital and maturing local markets. “The NSE has surpassed Hong Kong in terms of market capitalisation in November, reaching nearly $4 trillion driven by strong economic growth and benefiting from geopolitical shifts such as ‘China plus one’ supply chain de-risking,” the report found.

 

“In 2023, India proved to be a bright spot in the IPO space while other jurisdictions continued to remain relatively subdued due to various global political and economic developments, including conflicts. The increased deal activity in India could be attributed to stability in government policies, increased participation by domestic investors, particularly from retail investors and deals being reasonably priced.”
— Jabarati Chandra, S&R Associates

 

International geopolitics, a US recession, the Federal Reserve’s pause in interest rate hikes and global inflation, which India combated better, played a strong hand in keeping market optimism up in Mumbai.

Jabarati Chandra, a partner at Indian law firm S&R Associates, which also advised on the Tata Technologies IPO, attributed India’s growth to political stability and fiscal prudence. “In 2023, India proved to be a bright spot in the IPO space while other jurisdictions continued to remain relatively subdued due to various global political and economic developments, including conflicts. The increased deal activity in India could be attributed to stability in government policies, increased participation by domestic investors, particularly from retail investors and deals being reasonably priced.” The regulatory reforms in the market also egged companies and investors to invest in India’s stock markets. The Securities and Exchange Board of India halved the IPO listing timeline to three days from six days earlier, in June. SEBI explained that the move will likely benefit issuers who would receive securities listed in a shorter period, as well as investors who have not been allot-ted securities as they will get refunds quicker.

 

“The India IPO market has benefited from regulatory reforms in recent years, with a number of new measures introduced to streamline the IPO process and protect investor interests. While not hurdles, it is important to ensure that Indian regulators continue to imbibe the best from more developed markets and their regulators to ensure we stay on top of the latest developments, particularly in a dynamic and fast paced market like India.”
— Manoj Bhargava, Sidley Austin

 

“We guided clients in navigating through new regulatory requirements, including the shift to the accelerated T+3 settlement cycle. We had three deals that launched and closed on the same dates which presented its own set of unique challenges while testing the T+3 regime,” Chandra says.

Adds Bhargava: “The India IPO market has benefited from regulatory reforms in recent years, with a number of new measures introduced to streamline the IPO process and protect investor interests. While not hurdles, it is important to ensure that Indian regulators continue to imbibe the best from more developed markets and their regulators to ensure we stay on top of the latest developments, particularly in a dynamic and fast-paced market like India.”

SIZE VERSUS NUMBER

While 2023 saw a record turnout in the number of listings, the number of large IPOs was fairly low when compared to previous years. The average offer size has shrunk from $228 million in 2021 to $108 million in 2023.

This is due to the failure of big-ticket IPOs, indicating to issuers and bankers that India is an investor-driven market rather than a seller’s market. Life Insurance Corporation’s $2.7 billion IPO – one of the largest globally in 2022 – listed at a 7.8 percent loss despite having been oversubscribed three times and having strong domestic and international anchor investors.

 

LAW FIRMS ADVISING LARGEST ISSUERS IN MAINBOARD IPOs

Sl. No.	Issuer	Issue size ($ millions)	Issuer’s law firm	Sector
1	Mankind Pharma	530	Shardul Amarchand Mangaldas & Co.	Pharmaceuticals
2	Nexus Select Trust REIT	385	Cyril Amarchand Mangaldas	Real Estate
3	Tata Technologies	366	Cyril Amarchand Mangaldas	Technology
4	JSW Infrastructure	342	Khaitan & Co.	Infrastructure
5	Indian Renewable Energy Development Agency	259	Saraf & Partners	Finance

 

 

More moderate-size IPOs came into the market but reported higher listing gains and remain profitable even today. Tata Technologies reported the highest listing gain in 2023, at 162.6 percent. Smaller IPOs like Motisons Jewellers ($18 million), ideaForge ($68.5 million) and Utkarsh Small Finance Bank ($60 million) all reported listing gains close to 90 percent.

“The IPO wave over the last two-three months of 2023 could possibly be explained as a meeting of minds - if the price and the sector was right, there were willing buyers as demonstrated by the number of IPOs that were over-subscribed. This trend is expected to continue,” Chandra explains.

A good example is the government-backed renewable energy financier Indian Renewable Energy Development Agency, which went public with a $259 million IPO, led by Saraf & Partners. With an issue price of 32 rupees (40 cents), the share was oversubscribed 39 times and listed at 60 rupees, an 87.5 percent listing gain. This was despite being the fifth largest IPO in the country this year. The reduction in size and price did not affect law firm revenues, which continue to be buoyed by the sheer number of listings in the market. An Indian capital markets lawyer at a leading firm says that law firm revenues from listings are governed by the volume of work rather than the size. Moreover, representing an issuing company is more profitable than advising lead managers and exiting investors as billing, generally on an hourly mandate with caps, is higher when advising the company looking to go public, the lawyer explained.

Of the 57 IPOs on the mainboards this year, Cyril Amarchand Mangaldas advised 11 issuer companies, including Nexus Select Trust REIT ($385 million), Tata Technologies ($366 million), Honasa Consumer ($205 million) and R R Kabel ($236 million), the most for a firm this year.

Khaitan & Co. came in next, advising nine issuing companies, including JSW Infrastructure on their $342 million IPO. Shardul Amarchand Mangaldas & Co, which advised Mankind Pharma on its record-setting IPO, advised a total of eight issuing companies on their listings.

J. Sagar Associates advised six issuing companies, including the $228 million Cello World IPO – one of the most profit-able this year. Rounding out the top five was Crawford Bayley & Co, which advised four issuing companies. Alliance Law, S&R Associates and Trilegal advised three issuing companies each.

CAM also did the most work with issuing companies when examined by value, advising on $1.9 billion worth of deals. Khaitan and SAM led IPOs worth $1.25 billion, while JSA advised issuing companies on IPOs valued at $664 million. Trilegal and S&R Associates guided IPOs worth just over $200 million each. In terms of advising lead managers, Sidley Austin has served as international counsel to most banks on IPOs, regularly advising Kotak Mahindra Capital, ICICI Securities, Citigroup, Axis Capital, JM Financial and IIFL securities. Bhargava advised on a total IPO value of $1.67 billion, including Mankind Pharma, Mamaearth, Cello World, SAMHI Hotels and Concord Biotech.

Meanwhile, Latham advised lead managers on two marquee IPOs – Tata Technologies and Nexus Select Trust. Bhargava expects increasing work from India in 2024. “The India IPO market had a strong finish in 2023, and we see signs that this will continue into 2024. In our view, most major banks expect 2024 to exceed 2023 for both completed deals and revenues.”

 

 

TOP ADVISORS TO IPO ISSUERS BY DEAL NUMBER

Sl. No.	Law Firm	Total number of IPOs	Total value ($ millions)
1.	Cyril Amarchand Mangaldas	11	1902
2.	Khaitan & Co.	9	1257
3.	Shardul Amarchand Mangaldas & Co.	8	1254
4.	J. Sagar Associates	6	664
5.	Crawford Bayley & Co	4	145

 

 

ELECTIONS AND OUTLOOK FOR 2024

Some experts do believe that the flurry of IPOs in the second half of 2023 was to get ahead of the market cycle close to India’s upcoming general election in April. Traditionally, businesses have tended to go slow on large M&A and capital markets deals as national elections approach, but this does not mean a cooling off period for legal work.

“There may be a slow-down on deal launches just before the elections. However, we expect issuers to continue with IPO plans, complete the regulatory review and approval process and be in a position to launch after elections,” says S&R’s Chandra.

Adds Latham’s Gupta: “The first half of 2024 could be slow with the upcoming Indian general elections, although we expect the attractive and buoyant markets in India to propel a flurry of listings in the second half of 2024.” Bhargava goes a step further and says that there seems to be a general consensus around the re-election of Prime Minister Narendra Modi, and the IPO market will not see any effects from the upcoming polls.

“While nothing is certain, the consensus in India’s political landscape seems to be that Modi’s re-election is the most probable outcome in the upcoming India general election. As a consequence, the elections will likely have minimal impact on the IPO market, but we would expect some cooling off in launches, but not in work for lawyers, in the lead up to the elections themselves,” he notes.

But all three experts agree that 2024 is likely to bring more work than 2023. “Compared to 2021, which marked the listing of many of the home-grown start-up companies, 2023 saw more mature companies from the relatively traditional sectors hit the market. The funding winter and the increased regulatory scrutiny in the start-up space played a role in this. In 2024, we expect some of the PE-led start-up companies, such as those in fin-tech, EV, multi-channel retail and other new-age sectors, to take steps towards going public. The InvIT and REIT space is also expected to see continued activity,” says Chandra. The year 2024 has already seen five listings so far, including Medi Assist Healthcare Services’ $141 million IPO and Jyoti CNC Automation’s $120 million IPO. Electric vehicle giant Ola Electric is set to go public this year in a $700 million listing. Omnichannel retailer FirstCry also has plans to raise $600 million on the stack market. E-commerce SaaS platform Unicommerce, digital payments company PhonePe, food delivery platform Swiggy and hotel aggregator Oyo are all looking at large-size IPOs this year. Further, U.S. stock exchange Nasdaq has held talks with Indian authorities on potentially allowing local Indian companies to list directly on foreign stock exchanges, Reuters reported in January, bringing more work to law firms in the Indian IPO market.

“The outlook for India IPOs in 2024 and beyond remains strong for a number of reasons. Investors continue to be attracted to India due to its strong economic growth, large and young population, stable political landscape and rule of law, growing levels of domestic demand, favourable government policies which support FDI, and large levels of government investment in sectors like infrastructure which are set to maintain India’s high growth rate,” Bhargava says. Adds Chandra: “This trend of increased deal activity and the related conditions are expected to continue in the coming year – many issuers and their shareholders (including PE players) have been waiting for the right time to go to market, and 2024 is expected to be a busy year.”

Gupta also anticipates that market conditions will be conducive to larger IPOs in 2024.

“With the Indian markets continuing to be buoyant, we expect larger IPOs to hit the market in 2024. We expect the IPO market to be busier in 2024 compared to 2023,” he says.