Betting on India growth story: Fresh capital raised via IPOs highest in over a decade, points to capex revival – DailyExpertNews

Capex revival in the making: this year’s fresh capital raised by initial public offerings (IPOs) has reached its highest level in more than a decade, ET reports. This signals the expected revival of capital expenditure by the Indian private sector, which believes that the fast-growing economy will soon expand current capabilities.
Of the total IPO proceeds of Rs 27,435 crore announced or collected in 2023, about half will come from new issues. This means that these funds will be injected into the capital structure of the issuers, either to finance capital equipment or to pay off existing debt accrued for capacity expansion.
For example, JSW Infrastructure’s Rs 2,800 crore public offering consists entirely of primary shares. 88% of Samhi Hotels’ Rs 1,370 crore public offering consists of primary shares. Recent IPOs, including those of SignatureGlobal, Yatra Online and Zaggle Prepaid Ocean Services, also include significant new issuance components ranging from 70% to 85%.
Bankers note that companies are preparing for an economic expansion and making capital investments to take advantage of the expected boom. Dharmesh Mehta, MD and CEO of DAM Capital, explained that the latest public issuances are from the manufacturing sector, which is looking for substantial capital infusions for both capex and acquisitions. He added that these companies are strategically preparing for growth, supported by a positive outlook.

By 2023, about 50% of IPOs that have successfully raised money will come from the manufacturing sector, while 35% belong to other capital-intensive industries such as hotels, hospitals, logistics and construction. Notably, the banking, financial services and insurance (BFSI) sector was responsible for just two IPOs this year.
Abhijit Tare, CEO-Investment Banking at Motilal Oswal Financial Services, pointed out that amid market enthusiasm, companies are actively securing fresh capital to strengthen their balance sheets for future growth. Many mid-sized companies are expanding their capacity to adapt to the China+1 strategy, while others are preparing for capacity building under Production-Linked Incentive (PLI) schemes.
Over the past decade leading up to 2022, IPOs were primarily used to meet internal financial needs, with most funds going to existing shareholders. In 2022, only 30% of the total funding of Rs 59,302 crore came from primary issuances, while the remaining Rs 41,643 crore was raised through sale of existing assets by investors, according to Prime Database data. This marked a decrease from the 36% ratio observed in 2021. The ratio in 2020 was a paltry 13%.
Projects worth Rs 5.96 lakh crore were announced in the first quarter of FY24, the highest in five years. Although the government has stimulated investment in recent years, private capital expenditure, which has a substantial impact on economic growth and job creation, has lagged behind.