Indian Companies Ditch Private Deals, Embrace IPOs for Higher Valuations: Lighthouse Learnings, Piramal Glass Among Them

Indian companies are increasingly opting for initial public offerings (IPOs) instead of private deals to achieve higher valuations. Companies like Lighthouse Learnings and Piramal Glass have put aside their plans to sell stakes in private markets due to differences in valuation. Instead, they are now considering going public through an IPO.

Shift from Private Sales to Public Listings

Lighthouse Learnings, backed by KKR, had hired investment banks JP Morgan and Avendus to find a buyer for its 94% stake, but is now exploring an IPO or listing as a real estate investment trust (REIT). Similarly, Blackstone, the majority owner of Piramal Glass, is considering an IPO after abandoning a stake sale that had been in progress for five months.

Everstone and Manjushree Technopack Follow Suit

Everstone, the majority owner of healthcare services provider Everlife, also decided to go the IPO route after initially considering a complete sale. Packaging company Manjushree Technopack is another example of a company that chose an IPO over a merger or acquisition.

Other Companies Turning to IPOs

Other companies, like Aadhaar Housing Finance and Sai Life Sciences, have also shifted their focus to IPOs instead of private fundraising. Aadhaar Housing Finance listed earlier this year and has seen strong performance since. Sai Life Sciences filed for an IPO in July and is awaiting approval from the market regulator.

Strong Domestic Investor Interest

In 2023, domestic institutional investors (DIIs) in India bought shares worth ₹1.8 trillion, and this year so far, they have bought shares worth ₹2.98 trillion. This is more than the inflows from foreign portfolio investors (FPIs), which were ₹1.7 trillion in 2023 and just ₹15,731.6 crore up to August 20 this year.

Bull Market Boosts IPO Valuations

Klaas Oskam, CEO of global investment bank DC Advisory, noted that the current bull market has led to IPO valuations that are significantly higher than private market valuations. This makes IPOs a more attractive option for investors looking to gain liquidity. However, he cautioned that it remains to be seen how long this trend will continue.

Public Markets Provide Liquidity for Exits

V. Jayasankar, managing director at Kotak Mahindra Capital Co., added that the strong performance of Indian equity markets is providing large private equity investors with the liquidity needed to exit their investments through IPOs or the capital markets.

Public Markets Driving Startup Evolution

Anand Lunia, founding partner at India Quotient, noted that the best companies are often built in public markets, citing examples like Infoedge, Indiamart, and Zomato. He believes this trend is a natural evolution for Indian startups.

IPO Activity on the Rise

In 2023, 57 mainboard IPOs raised ₹49,435.53 crore, and this year, 40 mainboard IPOs have already raised ₹36,342.87 crore by July.

Private Market Slowdown Fuels IPO Trend

This shift towards IPOs is happening amidst a slowdown in private market fundraising, with early- and growth-stage investors being more cautious, while late-stage and buyout investors remain optimistic.