Kotak Investment Banking sees 2024 as the return of ‘large cap’ IPOs in India. The trend of robust block deal activity, which zoomed in 2023 raising over $ 20 billion, will also continue in 2024 along with near doubling of IPO volumes to $ 10-12 billion, said V Jayasankar, Managing Director & Member of the Board.

“One defining moment that we expect for 2024 is the return of large caps (Cos eyeing large market capitalisation). As we look at 2024, given that large caps have not participated in the equity rally as much as mid caps and small caps in 2023, they seem really poised for a relatively much better performance than small caps. 

You are therefore likely to see much larger IPOs getting done like Ola Electric, FirstCry and many in the works that will get filed. The pipeline is getting built there”, Jayasankar told businessline.

Kotak Investment Banking, which topped the overall ECM league table for the second year in a row in 2023, recorded a market share of 14.5% to ₹31,303 crore in 2023 from ₹15,045 crore in 2022. 

The total Equity Capital Market (ECM) market grew by 66% in calendar year 2023 to ₹2,18, 167 crore from ₹1,31, 887 crore in same period last year. The number of deals also jumped 66% to 340 in calendar year 2023 from 205 in calendar year 2022.

“India continues to be in a bright spot as the country is delivering on economic growth, there is strong flows from FPIs and DIIs and the block deal momentum continues to hold sway. 

We are now seeing greater number of large IPOs now filed with SEBI. So these are factors that make us optimistic about IPO business as well as block deal momentum continuing in 2024”, Jayasankar said.

Jayasankar said that he sees this expected diversity of large caps coming into prominence in 2024 and leading to a sharp uptick in overall IPO fund raising to $10-12 billion. In calendar year 2023, India saw IPO mop up of $ 6 billion over 58 IPOs.

Jayasankar highlighted that only nine of the 58 IPOs in 2023 had issue size greater than ₹1,500 crore. “In  CY 2021, the average IPO size was $250 million. In CY 2023, the average size had shrunk to $ 100 million. Year 2023 was that of small cap and mid cap IPOs. However 2024 will be more of large caps along with mid caps and small caps”, he said. 

Block Deals Surge

Jayasankar highlighted that block deal activity in 2023 at over $20 billion was over three times the IPO business of $6 billion. Kotak Investment Banking contributed to nearly 25% and was leading 3 of the 4 largest deals of calendar year 2023. Some of the clean out trades included Embassy REIT, Mankind Pharma and Kotak Mahindra Bank. In 2023, clean out trades amounted to $ 5.5 billion, enabling exits for 13 Private Equity firms across  16 counters.

Jayasankar highlighted that 2023 has seen the highest FPI inflows in secondary market with $20 billion as against outflow of $17 billion in previous year.

“Between FPI and DII you have seen $42 billion of inflows in 2023. I don’t think anyone has seen that level of inflows for a very long time. 

That with lack of adequate paper in mid cap and large cap propelled the blocks business. Blocks business was little over $20 billion while IPO was $6 billion. So blocks business was nearly three times the size”, he added.

Asked where his optimism comes from on the continued momentum in block deal activity in 2024, he said there were couple of factors.

“We feel confident because of couple of reasons. If you look at IPO market, volumes have been pronounced in last quarter (Oct-Dec 2023) as compared to first nine months. In Jan-Mar 2023 not a single IPO happened. Momentum picked up in August 2023 and December 2023 was an outstanding month because of state elections and the current government is probably on good wicket in 2024”, he said. 

“If you look at factors today, the blocks activity and IPO momentum of last quarter was pretty solid, flows from DIIs will continue to be great bringing in atleast $ 2 billion via SIPs and FPIs have very few options to invest as China is not a great place. Many analysts now see 2024 as even better year for indian equities than 2023, which itself was solid with aggregate inflows of $45 billion”.

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