FirstCry & Unicommerce IPOs Ignite Investor Excitement: Can the Momentum Last?

FirstCry and Unicommerce’s recent stock market debuts have continued the trend of remarkable IPOs, sparking significant interest among investors. This excitement indicates growing confidence in the companies’ business models, despite the recent global market downturn. Many wonder if this investor enthusiasm will persist, and experts believe it will.

Upcoming IPOs

V. Jayasankar, managing director and head of equity capital markets at Kotak Investment Banking, predicts a steady stream of high-quality, venture, and private equity-backed companies will enter the market in the coming months. The successful IPOs of companies like Ola Electric and FirstCry show investors’ strong appetite for electric vehicle and consumer tech firms, especially those with robust business strategies. Even amidst a global market sell-off, the Indian equity markets have shown their capacity to handle large offerings.

The number of IPOs increased by 66% in FY24, from 164 in FY23 to 272. The total capital raised also went up by 24%, from ₹54,773 crore in FY23 to ₹67,995 crore in FY24.

Investor Confidence

Prashant Rao, director and head of equity capital markets at Anand Rathi Investment Banking, notes that investors are confident due to the strong post-listing performances of recent IPOs, which leads them to expect similar returns in the future. The average returns of companies listed since January this year have exceeded 45% as of July 31, 2024.

Liquidity in the Market

With mutual fund assets under management (AUM) hitting new heights and systematic investment plan AUM reaching fresh peaks, Vaibhav Porwal, co-founder of Dezerv, believes the market is flush with liquidity. Fund managers and investors are eager to find new opportunities for deploying additional capital.

However, Porwal advises caution. He suggests that while new listings present opportunities, investors should not invest merely to capitalize on listing gains. In a bull market, certain companies can achieve inflated valuations based on popular trends, which may not be sustainable in the long term.

Rao also advises investors to focus on crucial factors before investing in IPOs, such as a company’s fundamentals, financial history, cash flows, business potential, valuations, and management quality.