The recent relaxation of minimum public shareholding (MPS) norms for large Initial Public Offerings (IPOs) is expected to have a limited immediate impact, according to Pranav Haldea of Prime Database Group. The new regulations are likely to affect only two to three large companies in the near term.

Current Market Landscape

At present, the Indian stock market boasts only ten companies with market capitalizations exceeding Rs 5 lakh crore, while a mere five companies have crossed the Rs 10 lakh crore threshold. This data underscores the exclusive nature of the new norms and their limited applicability in the current market scenario.

Diversification in the IPO Market

The IPO landscape in India is witnessing a significant shift towards sectoral diversification. Unlike the period from 2015 to 2020, which was dominated by Banking, Financial Services, and Insurance (BFSI) sector listings, the current market sees a healthy mix of new-age technology companies and traditional manufacturing firms making their public debuts.

New-Age Tech Companies in the Pipeline

Approximately 90 new-age technology companies are currently in the pipeline for public listings. This trend indicates a growing interest from innovative and disruptive businesses in accessing public capital markets.

Changing Perceptions of Indian Promoter Families

A notable trend is the increasing recognition among Indian promoter families of the wealth creation potential through IPOs. This shift in perspective is driving interest from traditionally family-owned businesses, potentially broadening the spectrum of companies considering public listings.

Existing Public Holdings in Large IPOs

Many recent large IPOs have already established significant public holdings due to earlier investments from private equity and venture capital firms. This existing diversification in ownership reduces the need for high dilution during the IPO process, aligning with the relaxed MPS norms.

Market Depth and Performance

The Indian stock market has demonstrated sufficient depth to absorb large issues. Both primary and secondary markets have shown robust performance since 2020, indicating a healthy appetite for new listings and supporting the case for relaxed norms for larger IPOs.

Conclusion

While the relaxation of MPS norms for large IPOs represents a significant regulatory change, its immediate impact is expected to be limited. However, this move could pave the way for more diverse and larger listings in the future, potentially reshaping the landscape of India's public markets.

The initial public offering (IPO) landscape in India is witnessing a significant shift, with companies adjusting their strategies in response to changing market dynamics and investor sentiment.

IPO Size Reductions Become Common

At least 15 companies have opted to reduce their IPO offer sizes, with cuts ranging up to 30%. This trend reflects a moderation in investor optimism and an oversupply of share offerings in the market. Notable examples include:

• JSW Cement: Reduced offer size from ₹4,000.00 crore to ₹3,600.00 crore
• Ather Energy: Trimmed from ₹3,100.00 crore to ₹2,626.00 crore
• Schloss Bangalore: Cut from ₹5,000.00 crore to ₹3,500.00 crore

MobiKwik stands out with three successive reductions, bringing its offer size down from an initial ₹1,900.00 crore in 2021 to ₹572.00 crore in the current market scenario.

Market Performance Comparison

The IPO market shows a marked slowdown compared to the previous year:

This data illustrates a significant decrease in both the number of IPOs and the total funds raised, indicating a more cautious approach by both companies and investors.

Factors Influencing the Market Shift

Market experts attribute this trend to several key factors:

1. Excessive Supply: The abundance of IPOs has given investors more choices, leading to divided attention and resources.

2. Valuation Mismatches: There's a growing gap between company valuations and investor expectations.

3. Institutional Caution: Institutional investors are showing wariness towards high valuations, impacting overall demand.

Adaptive Strategies

Companies are not standing still in the face of these challenges. Many are utilizing SEBI's 20% flexibility rule to adjust their offer sizes in response to current market conditions. This adaptive approach allows firms to align their offerings more closely with investor appetite and market realities.

Looking Ahead

As the IPO market continues to evolve, companies and investors alike are recalibrating their strategies. The trend of reduced offer sizes may persist as firms seek to find the sweet spot that balances their capital needs with market demand.

While the current scenario presents challenges, it also offers opportunities for both companies and investors to engage in the market at more sustainable valuations. The IPO landscape will likely continue to adapt, reflecting the ongoing interplay between corporate ambitions and market realities.