India ‘very favorable’ for IPOs, Peak XV says, as economic system and investor sentiment stays sturdy

May 16, 2024 | blog

Shailendra Singh, managing director of Peak XV Partners.
Lionel Ng | Bloomberg | Getty Images

India gives a “very favorable” setting for corporations to launch preliminary public choices, mentioned Shailendra Singh, managing director at Peak XV Partners, previously Sequoia Capital India & Southeast Asia.

“My general view is, especially in Indian public markets, the regulatory framework, what Securities and Exchange Board of India does, what Reserve Bank of India does, what other regulators do is actually really good,” Singh advised CNBC.

Singh, who has been on the VC agency for 18 years and led it since 2011, mentioned India has created “a very favorable environment” for corporations to listing there. “It’s both safe and dynamic in India for a young company to be able to go public.”

There have been 220 IPOs in India final 12 months, up 48% from 2022, making it the second-largest IPO market on this planet, in accordance with an EY report. Though Mainland China took the highest spot, the variety of IPOs there slid 29% to 302.

The Indian IPO market is set to stay sturdy in 2024, buoyed by optimistic investor sentiment, a strong economic system, and expectations of decrease inflation and charge cuts, EY mentioned.

“The Indian capital markets have evolved quite a bit. The markets have deepened in terms of liquidity. There’s lots of interest in tech companies coming up because … we are beginning to see a large number of companies with triple-digit million revenues and profits,” Singh mentioned.

India is rising as a brilliant spot amid world macroeconomic uncertainty, primarily pushed by optimism over the nation’s resilient financial fundamentals, KPMG mentioned final month in its report “IPOs in India.”

On why some Indian corporations choose to listing regionally, Singh mentioned: “Founders are realizing that the U.S. markets may not always understand Indian companies.”

As many as 20 corporations together with Zomato and Mamaearth in Peak XV’s portfolio have listed by way of IPOs, the agency mentioned. Peak XV Partners, one in all Asia’s largest tech traders, manages $9 billion in belongings.

In June, Sequoia divided its world partnership into three unbiased models, particularly Sequoia Capital in the U.S. and Europe, Peak XV Partners in India and Southeast Asia and HongShan in China.

The enterprise capital agency has invested in additional than 400 corporations throughout the expertise, software program, monetary companies and shopper sectors together with India’s fintech agency Pine Labs, Indonesian espresso chain Kopi Kenangan, Singapore-based on-line market Carousell and edtech corporations Byju’s and Unacademy.

Favorite sectors in India

India has a number of “pretty exciting” funding areas, Singh mentioned, naming cross-border software program, fintech and shopper because the agency’s largest sectors for investments.

Cross-border software program is a key space Peak XV is betting on, given the potential of software program corporations being inbuilt India for the entire world, he mentioned.

“Our second-[biggest] sector tends to be fintech. We are a very strong fintech investor. I think India is one of the world’s most fertile markets because of Aadhaar, UPI and the India stack.”

In the consumer-centric sector, he listed shopper manufacturers, ed-tech and healthcare because the the agency’s focus for investments.

“We will see plenty of good education companies being built in the long-term,” Singh mentioned, given that buyers in locations like India and China perceive that the trail to upward social mobility is thru schooling.

There are additionally rising areas corresponding to deep tech and semiconductors, that are attention-grabbing although it is nonetheless early days, he mentioned. “We are [just] starting to make bets.”

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