India's Booming IPO Market Attracts Consumer-Centric Companies

India's thriving stock market and robust economic growth have piqued the interest of consumer-focused companies, leading them to go public in a bid to capitalize on the country's burgeoning consumer market. From food delivery platforms to jewelry companies and even electric scooter manufacturers, these businesses are seeking to tap into the nation's rising private consumption and investor appetite for business-to-consumer ventures.

Unlocking India's Consumption-Driven Growth Story

Riding the Wave of India's Consumer Boom

India's consumer market is poised to become the world's third-largest by 2027, according to a report by BMI, driven by strong growth in consumer-focused sectors ranging from healthcare and transportation to consumer staples. This shift has been fueled by a resurgence in private consumption, which Atul Singh, CEO and managing director of wealth management firm LGT Wealth India, attributes to a "better macro outlook" and increased investor risk appetite for business-to-consumer companies.The IPO market in India has been thriving, with a record 238 listings in 2023 that raised 614 billion Indian rupees ($7.35 billion), according to FactSet data. This momentum has continued into 2024, with 264 IPOs already recorded so far this year.

Automakers Lead the Charge

The transportation sector has been at the forefront of this IPO wave, with Hyundai Motor India aiming to raise $3 billion from its public offering, potentially surpassing the $2.7 billion listing of state-owned Life Insurance Corporation. This comes on the heels of the successful debut of Ola Electric, the electric two-wheeler manufacturer, whose shares surged 20% on their market debut.According to LGT Wealth's Singh, the momentum in the automotive sector is slowly trickling down to other consumer-focused segments of the economy, with the "first leg of the consumption story" shifting from big-ticket items like cars to smaller-ticket consumer staples.

Feeding the Appetite for Food and Beverage

The food and beverage industry has also caught the attention of investors, with Softbank-backed food delivery platform Swiggy reportedly filing for an IPO on September 26. Its competitor, Zomato, had gone public in 2021 and has seen its shares surge over 120% year-to-date.Feroze Azeez, deputy CEO of wealth management firm Anand Rathi Wealth, explains that these loss-making businesses are seeking to go public to raise capital for expansion, rather than focusing on immediate profitability. The success of Zomato, which has turned profitable in the last two quarters, has shown that such companies can become profitable sooner than expected.

Shining a Light on Jewelry

Another sector that has seen a flurry of IPO activity is the jewelry industry, a significant business in India given the country's love for gold. PN Gadgil Jewellers, which listed on both the Bombay Stock Exchange and the National Stock Exchange this month, made a strong debut on the bourses.This follows the successful listings of other jewelry brands in 2023, such as Senco Gold and Motisons Jewellers, whose shares have surged 108% and 211%, respectively, since the start of the year. Anushri Bansal, Asia-Pacific's senior economist at Mastercard, attributes this to the strong preference of Indian consumers to invest in physical assets like gold, both for jewelry and investment purposes.

Expanding Beyond Consumer-Focused Sectors

While consumer-focused sectors have been the primary drivers of the IPO boom, analysts have also observed interest from financial companies in the non-banking sector. For instance, Bajaj Housing Finance, a home loan provider, went public on September 16 and saw its shares surge by around 130% on their debut.LGT Wealth's Singh notes that Bajaj Housing has an "excellent reputation" and good quality management, and the positive macroeconomic outlook is making these financing companies an attractive bet for investors.As India's consumer market continues to grow, the country's booming IPO market is attracting a diverse range of consumer-centric companies seeking to capitalize on the nation's rising private consumption and investor appetite. From automakers and food delivery platforms to jewelry companies and financial firms, these public offerings are shaping the future of India's consumption-driven growth story.