India Capital Markets Research

In what was not a banner year for capital markets, India’s IPO market performed surprisingly well, exceeding expectations and the performance of numerous competitors. We had been expecting Hong Kong to stage a strong comeback in 2023 – which did not happen – while mainland China also did not perform as all as we expected, despite contributing about 40% of global proceeds last year. Overall, in 2023 732 companies went public in Asia Pacific raising US$69.4 billion, an annual decrease of 18% and 44% respectively. India, however, recorded 57 deals that raised roughly US$6 billion. While proceeds were down from 2022’s US$7.2 billion, the number of IPOs was up by more than 25% and among the most of any single market in the world.

When it rains it pours, at least for super apps. Throughout Asia, platform companies are struggling as their capabilities often cannot match overly lofty investor expectations. The problem is especially acute for India’s Paytm, whose record-breaking IPO – it is India’s largest to date – nevertheless turned out to be a sign of worse things to come. Paytm’s stock fell 27% on its first day of trading and has fallen about 65% since the November IPO to 543.5 Indian rupees.

Paytm has managed a curious feat, pulling off an underwhelming IPO that is still India’s largest of all time. The buildup to the record-breaking US$2.5 billion deal was tremendous, with expectations set high, to say the least. Yet shares fell 27% on Paytm’s trading debut, erasing US$5 billion in market value and raising questions about the company’s way forward.

Paytm’s IPO is fast becoming larger than life. Analysts are now almost certain the deal will be India’s biggest of all time, raising up to US$2.4 billion (up from an earlier estimate of US$2.2 billion) at a valuation of US$20 billion. The firm reportedly plans to price its shares in the range of 2,080 to 2,150 Indian rupees (US$27.70 to US$28.60), with subscription available from November 8 to 10 and trading to begin around November 18.

India’s tech sector has been booming for years, but it is only now that the growth is coming to fruition in the subcontinent’s capital markets. Many of the country’s most successful platform companies, like Zomato and Flipkart, and fintechs, like Paytm, are choosing to go public in 2021 and they are listing at home rather than on the NYSE or Nasdaq.

2021 will likely be remembered as the year that Asia’s fintech unicorns (ex-China) cashed out. India’s Paytm has become the latest high-flying fintech to cement its plans to go public, filing a draft prospectus with the Securities and Exchange Board of India (SEBI) for a deal expected to raise US$2.2 billion. The deal will be one of India’s largest of all time, including a fresh issue of US$1.1 billion and a secondary issue or offer for sale of the same size.

Paytm is the latest SoftBank-backed unicorn to head for the exit ramp. India’s most valuable startup is planning an IPO in the subcontinent later this year that will value the company at US$25 billion to US$30 billion and raise up to US$3 billion, according to Bloomberg. If the deal is successful, it may be the largest in India’s history.

India's Paytm hopes to follow in the footsteps of its key backer Ant Group and build a super app centered on financial services. In a market as large, diverse and fragmented as India's, it is unlikely any app could become a dominant as Alipay and WeChat are in China. However, "super" need not mean the app for everything, maybe just for most of one's digital banking needs. That's why Paytm is steadily adding new services. The latest one is stock trading, a fast-growing business in India.

The Securities and Exchange Board of India (SEBI) has introduced a number of measures recently in the capital and commodity markets to improve the quality of market infrastructure and the depth of trading that takes place. We will look at three examples of the recent changes being made by the SEBI here.

Anti-money laundering activities are taking the center stage in Indian financial markets. The recent crackdown on shell companies, and brokerages helping them, by the Securities and Exchange Board of India (SEBI) is part of a concerted effort by the Government to clean up the financial markets in India.

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