He said the stronger gains reflect more attractive pricing and a higher margin of safety for investors, encouraging more companies to tap the primary market.
“There’s a lot of margin of error or there’s a lot of margin of safety that is actually built in into the pricing,” Shah said.
The improvement has been particularly visible in recent months. Shah said IPOs launched between July and August have delivered average listing gains of around 25%, compared with about 11% for all IPOs launched so far this year.
Kaushal Shah, Managing Director and Head of Equity Capital Markets at Kotak Investment Banking, said around 13-14 IPOs worth more than ₹40,000 crore have come to the market in the last month alone. That represents roughly 55-60% of all IPOs launched this calendar year, highlighting the sharp pickup in activity.
He attributed the strong demand to several factors, including the fading of concerns around the West Asia crisis, corporate earnings and the monsoon. He also pointed to differentiated businesses and manufacturing companies as major attractions for investors.
“There’s a significant tailwind, especially with respect to the manufacturing sector,” Kaushal Shah said.
The strong response could encourage more companies to come to market, including some large offerings. Bhavesh Shah said India had already raised close to $7 billion through IPOs by August, against his expectation of around $20 billion for the full year.
With several large issues in the pipeline, including Jio and National Stock Exchange (NSE), he expects the momentum to remain strong. While he did not comment on specific timelines, he said work on these offerings is underway.
The bankers also believe investors can back loss-making new-age technology companies, provided the underlying growth story is strong. Kaushal Shah said investors look beyond current profitability and focus on factors such as growth, market-share gains, margin expansion and the potential for stronger returns over the next three to five years.
“If the business model is strong where you see that the margins are expanding, where the return profile is building strong, the companies are gaining market share, I think all these factors go into deciding in terms of the investment themes,” he said.
The contrasting experience of companies such as Zepto and Shiprocket shows that investors are becoming more selective, but not necessarily unwilling to back loss-making businesses. Earlier new-age listings such as Eternal (Zomato), Swiggy and PB Fintech (Policybazaar) also demonstrate how strong growth expectations can support valuations over time.
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On SBI Cards and Payment Services, which has remained below its issue price despite strong demand during the IPO, Kaushal Shah said the stock’s future performance would depend largely on its financial results. Investors, he said, will closely track the company’s performance over the next three to four quarters after the IPO.
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