If macro conditions hold, IPOs will top 2024's record tally: Sunil Khaitan

'Issuers and investors recognise the need for balanced pricing rather than short-term gains,' says managing director and head of India Financing Group at Goldman Sachs

The equity capital market (ECM) broke the record last year when it mobilised Rs 1.6 trillion mobilised through initial public offerings (IPOs). It has slowed down now but SUNIL KHAITAN, managing director (MD) and head of India Financing Group at Goldman Sachs, believes market volatility hasn't hindered IPOs. In an interview with Samie Modak and Sundar Sethuraman in Mumbai, Khaitan expressed optimism that 2025 could be another exceptional year, citing growing recognition among issuers and investors of the importance of balanced pricing over short-term gains. Edited excerpts:

 

Market volatility spiked after September. How does this impact ECM activity?

 

Volatility intensified recently but ECM deals remained active through December and January. Foreign investors, while net flat on secondary markets, deployed $12 billion in primaries (IPOs/blocks) in 2024, signalling a shift toward structured opportunities. The IPO market slowed by March due to valuation mismatches and a consumption slowdown but filings continue as issuers focus on long-term readiness. Foreign investors prioritised primary markets (IPOs/blocks) over secondary markets, deploying capital thematically. However, valuations in small/midcap segments corrected 20 per cent, making issuers hesitant. Additionally, retail and HNI [high-net-worth individuals] participation softened due to macroeconomic uncertainty. The ecosystem is maturing — both issuers and investors now recognise the need for balanced pricing rather than optimising short-term gains. 

 

Is the IPO pipeline strong enough to match 2024’s record Rs 1.6 trillion?

 

If macro conditions hold — RBI [Reserve Bank of India] policies, tax cuts boosting consumption, and global confidence in India — we could exceed 2024’s figures. The first half of 2024 had smaller deals; this year’s larger, high-quality issuers may accelerate the total once the market fully opens up. The key is balancing foreign and domestic participation while ensuring IPOs cater to long-term holders. We advise issuers to stay ready — regulatory approvals are valid for 12 months, allowing flexibility to launch when windows open.

 

Are IPO filings as robust as last year, or is there a slowdown?

 

Filings continue at a strong pace. The only pauses occur when business performance slows, for instance during India’s recent consumption slowdown. Companies may delay filings temporarily to reassess, but market volatility hasn’t deterred the process. The IPO journey typically takes over six months post-filing (DRHP submission) and another three months to listing. Despite a lean period post-October, momentum persists.

 

Which sectors dominate the IPO pipeline?

 

The pipeline is diverse. About half are tech-centric (fintech, healthtech, B2B platforms), alongside traditional sectors like financials and cement. A key trend is manufacturing or industrial companies (precision engineering) attracting global interest. Startups are pivotal: India’s investor base now rivals global markets in sophistication. Mutual funds ($800 billion in assets under management) seek technolog exposure, enabling loss-making firms to list here — a shift from the past.

 

How do you navigate expectations of sellers and buyers in volatile markets? 

We emphasise long-term multiples over point-in-time valuations. Indian markets have sustained sectoral multiples historically, despite short-term swings. For IPOs, we focus on companies with funded business plans (not cash-burning) and secondary sales (60-90 per cent investor-owned). Both sides realise that a well-executed IPO benefits long-term exits, even if valuations adjust temporarily.

 

Confidential filings have picked up lately. What are the merits and demerits? Will more companies take this route?

 

Confidential filings are permitted by regulators globally but their use should align with clear business needs. The primary reason for opting for confidential filings is to prevent sensitive data from falling into competitors’ hands. When you are still uncertain of listing plans, certain public disclosure could risk strategic interests. Also, if business performance is temporarily weak but expected to improve, confidential filings allow time to align with regulatory expectations before going public. Such filings also give companies more time to resolve compliance gaps before making full public disclosure. The most significant downside is the timeline delays. In volatile markets, when execution windows are shrinking, a confidential filing can stall transactions — even with willing buyers and sellers. This process often includes a three-week public disclosure period post-approval, which negates the benefits it offers. As a result, most favour public filings for speed, especially amid market volatility. We tell clients, if you are considering confidential filings let’s have an open discussion about it.

 

  Lock-up expiries often trigger sell-offs, but some stocks rally. Why?

  Lock-up expiries become liquidity events if anchor investors are strategically allocated. For example, a $5 million anchor allocation is too small for large funds to prioritise research or tracking. By ensuring anchor books have meaningful stakes, post-lock-up demand emerges. Investors also see expiries as opportunities to build positions in companies with strong fundamentals, especially with domestic mutual funds flush with capital. 

 

Promoters/PEs are selling large stakes, which was rare earlier. How is this perceived?

 

Financial sponsors (PEs/VCs) exits are now seen as a positive ‘overhang removal’. Markets understand these investors aren’t perpetual holders. A full exit signals supply exhaustion, letting fundamentals drive the stock. For instance, a PE [private equity] selling its entire stake allows institutions to buy in size without fearing future sell-downs. Strategic promoter sales are rarer but accepted if aligned with transparent communication.

 

  What is driving the reverse-flipping trend?

  Companies that once structured for US listings now prefer India. Reasons include deeper markets, investor savvy, and valuations. For sub-$5 billion firms, India offers dedicated capital and research coverage. Mega firms may eventually have to pursue ADRs [American Depositary Receipts] but mid-sized companies benefit from local liquidity and tax incentives. Reverse flipping reflects confidence in India’s ecosystem — startups like Zomato and Nykaa paved the way, showing domestic investors embrace long-term tech growth. Reverse flipping entails tax costs but signals commitment to India’s growth. Companies also gain better research coverage and alignment with ‘Made in India for the world’ narratives.

 

Are more multinational corporations (MNCs) looking to list in India?

 

MNCs globally are evaluating India listings due to its premium valuations. Many subsidiaries here trade at significant premiums to their parent companies. Success hinges on structuring deals as win-wins, not mere monetisation. Issuers must commit to Indian shareholders long-term, not just consumers. Valuations are multiple-driven, often benchmarked against local peers. While recent multiple compression (due to consumption slowdowns) impacts pricing, it’s not a blanket 30 per cemt discount. IPO discounts fluctuate (5–15 per cent to listed peers) based on market sentiment. Our role is to emphasise sustainable value over short-term considerations. 

 

How has 2025 shaped up so far for Goldman Sachs?

 

Last year, we executed 19 deals: three IPOs and 16 blocks. This year, despite a less conducive market, we’ve already closed four deals.

 

Goldman Sachs wasn’t historically a leader in India’s ECM space. How did you build the franchise?

 

Goldman’s global ECM leadership and long-standing advisory presence in India helps. We leveraged existing corporate relationships to position ECM as a natural extension of our services. It’s an intensely -competitive market, but clients trust our ability to replicate global best practices here. Our active participation in high-profile deals (IPOs, blocks) has been critical in establishing our franchise.