The big story
India’s consumer tech-focused Urban Company’s listing on Wednesday offered a snapshot of global money flowing into the country’s primary equities market.
The company’s founders, dressed in uniform-like blue jackets and khaki pants, rang the bell at the National Stock Exchange to start the trading day. And they weren’t the only ones with smiles as the day ended with their company’s shares soaring nearly 60% on debut.
Celebrating with them were investors from San Francisco, New York, London and Singapore who had been allotted shares of Urban Company last Tuesday at a valuation of 147.90 billion rupees (nearly $1.7 billion), according to the IPO filing. In less than 10 days, the company’s valuation jumped to $2.8 billion. The per share allocation price was 103 rupees, and the stock was last trading 64% higher at 169 rupees.
The enthusiasm around Urban Company underlines a curious trend: Since 2024, foreign investors have been net sellers of Indian equities in the secondary market, but they have been rushing into India’s primary market, which consists of initial public offerings and follow-on public offers.
Overseas investors made net investments to the tune of $14.5 billion in the primary market last year, while redeeming $14.4 billion from the secondary markets, according to data from the National Securities Depository. Year to date, they have been net sellers of stocks worth $20.7 billion but have invested net $4.8 billion in the primary market.
“We have found there is a potential to generate alpha by participating in IPOs,” said Hiren Dasani, chief investment officer for emerging market at Singapore-based firm White Oak Capital, which participated in the Urban Company IPO.
For global investors, the math is simple. India’s secondary market looks overpriced as compared to other emerging markets. MSCI India index trades at a price-to-earnings ratio of 25.4x as compared to MSCI Emerging Market Index — which includes India — with P/E ratio of 15.41x. The MSCI China index trades at 14.6x while MSCI Korea index is at 12.4x.
Even the U.S. imposing 50% tariffs on Indian exports has not led to any significant correction in the market, preventing investors from entering cheap.
In such a scenario, IPOs offer a better play for the Indian markets as managements and bankers price the issue attractively, drawing significant investor interest, experts told CNBC.
Returns from Indian IPOs in 2024 were starkly higher at 37.1%, compared with its stock market returns of just over 7%, according to EY’s Global IPO trends report.
“India generally presents an attractive opportunity set for investors, due to the macro background (e.g. GDP growth and favorable demographics), range of interesting business models, and some extremely high-quality management teams,” said Alexander Treves of J.P. Morgan Asset Management in an email response to CNBC, adding that IPOs offer the “potential opportunity to build positions in new equities at a transparent price,” allowing investors to take advantage of the Indian market.
IPO boom
In 2024, India ranked number one globally in term of IPO volumes, listing nearly twice as many companies as the U.S. and more than two-and-a-half times as many as Europe, the EY report showed.
In terms of IPO value, India ranked second with companies raising a total of $19.9 billion last year compared with $32.8 billion raised in U.S. This included the country’s largest and globally the second-largest IPO, Hyundai Motor India, which successfully raised $3.3 billion from investors.
The current market situation is a far cry from Coal India’s $3 billion issue a decade back that, per domestic media, had led to a liquidity crunch in the country’s banking system, including massive redemptions in mutual funds from investors eager to invest in the IPO.
The ability of Indian markets to absorb large issuances has improved, thanks to the rising flows from domestic investors, Dasani said, adding that if foreign institutional investors can sell without any major “impact cost,” then FIIs can also invest more. Impact cost refers to the extent to which trade orders — buy or sell — can move stock prices.
The steady demand from domestic institutional investors has deepened equity markets and improved liquidity, giving FIIs the confidence of participating in IPOs without worrying about getting trapped.
For the past 54 months, equity mutual funds have seen net inflows, with assets managed by Indian mutual funds rising to about $850 billion in June 2025 from about $696 billion in June 2024, according to data from the Association of Mutual Funds in India. Sizeable equity markets mean larger appetite for bigger IPOs, drawing interest from FIIs.
“In terms of volume of IPOs, fiscal year 2026 will be similar to FY25, which was a record year in terms of public listings,” says Shouvik Purkayastha, managing director of investment banking at Nuvama. Given a number of big corporates queuing up for listing this year, he expects an “uptick in value terms”.
October is likely to witness the launch of Tata Capital’s $2-billion IPO and a similar-sized issue of shares by the Indian subsidiary of South Korea’s LG Electronics, according to media reports.
Last month, Mukesh Ambani, chairman of Reliance, India’s retail-to-telecom conglomerate, also announced plans to list his telecom business, Jio Platforms, in the first half of 2026.
This interplay between domestic and foreign capital is creating a virtuous cycle. Strong domestic participation gives companies confidence to launch bigger IPOs and those in turn attract foreign investors that prefer scale and liquidity.
To put it all together, foreign investors selling in the secondary market while writing checks for IPOs is not a contradiction, it is a strategy — one that has paid off well so far.
source: cnbc.com
